Type

Essay

Pages

12 pages

Word Count

870 words

School

NY

Course Code

EED

Bad

January 9, 2021

Session 2: Balance of Payments

Global Financial Management

Meng Gao

School of Business, University of Connecticut

Quiz: Current account transfers

•What happens to France’s BOP if

•LMVH, a French luxury goods company, buys €1.5M of

consulting services from a British subsidiary of BCG

•LMVH pays by writing a check on its € bank account at

Societè Generale in Paris, and BCG deposits the check

at Banque Paribas, also in Paris

rules

Quiz

•In the latter half of the 1980s, with a strong yen, Japanese firms

•

A) faced difficulty exporting.

B) could better afford to acquire U.S. assets that had become

less expensive in terms of yen.

C) financed a sharp increase in Japanese FDI in the United

States.

D) all of the options

Summary of BOP Accounting

•The BOP sub-accounts from the U.S. point of view

Debits (-) Credits (+)

Imports to the U.S. Exports from the U.S.

Payment by the U.S. of dividends and interest to foreigners Receipt by the U.S. of dividends and interest from foreigners

Capital Outflows Capital Inflows

Increase in U.S. ownership of foreign assets Increase in foreign ownership of U.S. assets

Decrease of foreign ownership of U.S. assets Decrease in U.S. ownership of foreign assets

Increase in Official reserves of the Federal Reserve Decrease of official reserves of the Federal Reserve

IA. CURRENT ACCOUNT TRADE BALANCE

IB. CURRENT ACCOUNT INVESTMENT INCOME

II. Financial ACCOUNT

III. The Official Reserves Account

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