Question

Consider the following balance of payments data. (in billions of dollars): - Merchandise Exports: $100 -...

Consider the following balance of payments data. (in billions of dollars):

- Merchandise Exports: $100

- Merchandise Imports: $125

-Service Imports: $90 -Service Exports: $80

-Income received from abroad: $110

-Income payments to foreigners: $150

-Increase in US ownership of private assets abroad: $160

-Increase in foreign ownership of private US assets: $200

-Increase in home official reserve assets: $30

-Increase in foreign official assets in US: $35

Assuming that unilateral transfers are zero, find the statistical discrepancy.

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Answer #1

In BOP account transactions are recorded as credit or debit according to the following simple rule:

  • Any transaction that brings in foreign exchange for a country is a credit item and any transaction that causes a country to loose foreign exchange is a debit item. For example, exports is a credit item because it brings in foreign exchange and imports is a debit item because it leads to outflow of foreign exchange.

BOP Credits

Increases in:

Domestic Liabilities
Revenues

Decreases in:

Assets
Expenses

BOP Debits

Decreases in:

Domestic Liabilities
Revenue

Increases in:

Assets
Expenses

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