Balance of Payments

[Nialllovespie]

Hiya,

I was just wondering what is recorded in the Capital and Financial Accounts, the Primary account and the secondary account?

I'm a bit confused haha

Thanks in advanced!

Nia

[isaacdelatorre]

Hiya,

I was just wondering what is recorded in the Capital and Financial Accounts, the Primary account and the secondary account?

I'm a bit confused haha

Thanks in advanced!

Nia

Hey Nia,

so the structure of the balance of payments is as follows:

Current Account - non reversible transactions
Balance on Goods and Services - net goods + net services (X-M)
Primary Income Account/Net Income Account - payments of servicing costs (i.e. interest payments from loans, profits from owning shares)
Secondary Income Account/Net Secondary Income Account - transfer payments/non market transfers (pensions to those living outside of their country of origin, workers remittance)

Capital and Financial Account - all international borrowing and lending transactions of Australia’s public and private sectors.
Capital Account - conditional foreign aid or Non-financial or non-produced assets such as intellectual property rights
Financial Account -

• direct investment - more than 10% of a company
• portfolio investment - buying land, shares and other marketable securities in existing companies (less than 10%) also includes debt (loans)
• financial derivatives - financial instruments used to hedge/minimise volatility of exchange rate fluctuations
• other investments
• reserve assets[li/]
  

Net errors and Omissions - used to make it balance (i don't totally remember this- someone may be able to help)

That's the structure of BOP - let me know if anything needs clarifying

Good luck!!!

[Nialllovespie]

Ohhhhhhhh okay this is all starting to make sense now

Thank you so much for the explanation!!