Balance of payments

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Balance of payments
- current account
  - balance of trade
  - current transfers
    - grants/ foreign aid
  - net investment income
    - profits/ dividends sent abroad
  - deficit
    - ^ in domestic econ growth
      - production ^ = derived demand for workers
        ^ disposable income
        consumers buy luxury goods
        more imports
    - appreciation
      - exports prices increase
        when expressed in terms...
        less demand for exports
        more imports
  - surplus
    - global slowdown
      - UK enter financial crisis of 09
        low demand for products
        demand deficient un employment
        less income = less imports
    - depreciation
      - export prices fall
        when expressed in terms...
        ^ demand for exports
  - reducing the deficit
    - deflationary fiscal policy = ^ TAX
      - e.g. income tax = less disposable income
        less spending on luxury imports
    - SSP's = grants for R&D
      - make UK firms more competitive
        boosts potential exports
- capital account
  - capital transfers
  - always been in surplus since 1982
  - sale/ puchase of non - financial assets
- financial account
  - FDI
  - surplus for 6 years
- global trade imbalances
  - CA deficit = financial and capital surplus
  - Gov have to fund deficit by selling assets through FDI
exports > imports
SPICED
WPIDEC
Marshall Lerner
- "a depreciation will only lead to to the CA improving if: PED(x) + PED(y) = >1
- EVA
  - J Curve

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