The rate of consumer spending on imports.Factors affecting the balance of paymentsĪ current account deficit could be caused by factors such as. The appreciation in the exchange rate would make exports less competitive and imports more competitive therefore with fewer exports and more imports there would be a deficit on the current account.
If there was an increase in interest rates this would cause hot money flows to enter the UK, therefore there would be a surplus on the financial account. Therefore if there is a deficit on the current account there will be a surplus on the financial/capital account. In a floating exchange rate the supply of currency will always equal the demand for currency, and the balance of payments is zero. Even now some people refer to financial account as the capital account) (note the Financial Account used to be called the Capital Account, which is potentially quite confusing. In practice when the statistics are compiled there are likely to be errors, therefore, the balancing item allows for these statistical discrepancies. 
This refers to the transfer of funds associated with buying fixed assets such as land 4.
foreign investor saving money in a UK bank to take advantage of better interest rates – will be a credit item on financial account
short-term monetary flows known as “hot money flows” to take advantage of exchange rate changes, e.g. These are financial flows, such as the purchase of bonds, gilts or saving in banks. For example, if a UK firm built a factory in Japan it would be a debit item on UK financial account) This is a record of all transactions for financial investment. Primary income flows (wages and investment income) Balance of trade in services (invisibles) e.g. This is a record of all payments for trade in goods and services plus income flow it is divided into four parts. It consists of the current and financial account The Balance of Payments is a record of a country’s transactions with the rest of the world.
0 kommentar(er)
