Studving? RESEARCH TOOLS Economist.comsuRveYs Facts behind the figures Sep 18th 2003 From The Economist print edition Much ado about nothing Current account Private capital account Merchandise trade Direct investment Imports of goods Equity flows = Trade balance Long-term bank debt Tourism Basic balance Professional and other services Balance of payments Goods-and- services balance +Interest and other investment income +official reserve transactions Unilateral transfers Changes in foreign central banks' holdings of domestic currency Current-account balance hanges in domestic central banks'holding of foreign Sources:"World Trade and Payments, by Richard E Caves, Jeffrey A Frankel and Ronald W Jones: The Ecomomist a quick guide to the balance of payments JUST as a company's accounts can seem impenetrable to the layman, so a country's external accounts look intimidating at first sight. Like corporate accounts, they need decoding A country' s balance of payments gives a snapshot of all transactions with foreigners. It has two main parts. The current account measures mainly trade in goods and services(known as the trade balance). It also includes interest paid on foreign borrowing(or received on foreign investments), as well as unilateral transfers abroad such as official foreign aid and remittances by foreign workers The second part of the balance of payments is the capital account. It measures all asset transactions with foreigners. the private capital account is made up of private investments whether foreign direct investment, stocks, bonds or bank loans. All official transactions(such as the central bank building up reserves) are dubbed official reserve transactions The sum of the current account the private capital account and the official reserve transactions is always zero. Thus net capital inflows, whether private or official, imply a current-accountFacts behind the figures Sep 18th 2003 From The Economist print edition A quick guide to the balance of payments JUST as a company's accounts can seem impenetrable to the layman, so a country's external accounts look intimidating at first sight. Like corporate accounts, they need decoding. A country's balance of payments gives a snapshot of all transactions with foreigners. It has two main parts. The current account measures mainly trade in goods and services (known as the trade balance). It also includes interest paid on foreign borrowing (or received on foreign investments), as well as unilateral transfers abroad, such as official foreign aid and remittances by foreign workers. The second part of the balance of payments is the capital account. It measures all asset transactions with foreigners. The private capital account is made up of private investments, whether foreign direct investment, stocks, bonds or bank loans. All official transactions (such as the central bank building up reserves) are dubbed “official reserve transactions”. The sum of the current account, the private capital account and the official reserve transactions is always zero. Thus net capital inflows, whether private or official, imply a current-account