A REPORT ON BALANCE OF PAYMENTS

Submitted to Prof. Naveen Rego Faculty for International Finance Mulund College of Commerce

Submitted by Students of TYBMS nt!ony "evassy "ee'ti Ro(de +urunat! Pai Nitin -aldan(ar S!e(!ar /ais0al Yoges! C!ande(ar Roll No. #$%& Roll No. #$)* Roll No. #$), Roll No. #$.. Roll No. #$.$ Roll No. #$%1

C2NC3PT 453STI2NS
BALANCE OF PAYMENTS T!e balance of 'ayments of a country is a systematic record of all economic transactions bet0een t!e residents of a country and t!e rest of t!e 0orld. It 'resents a classified record of all recei'ts on account of goods e6'orted7 services rendered and ca'ital received by residents and 'ayments made by t!eme on account of goods im'orted and services received from t!e ca'ital transferred to non8residents or foreigners. - Reserve Bank of India T!e above definition can be summed u' as follo0ing9 8 Balance of Payments is t!e summary of all t!e transactions bet0een t!e residents of one country and rest of t!e 0orld for a given 'eriod of time7 usually one year. T!e definition given by RBI needs to be clarified furt!er for t!e follo0ing 'oints9 A. E ono!i Transa "ions n economic transaction is an e6c!ange of value7 ty'ically an act in 0!ic! t!ere is transfer of title to an economic good t!e rendering of an economic service7 or t!e transfer of title to assets from one economic agent :individual7 business7 government7 etc; to anot!er. n international economic transaction evidently involves suc! transfer of title or rendering of service from residents of one country to anot!er. Suc! a transfer may be a re<uited transfer :t!e transferee gives somet!ing of an economic value to t!e transferor in return; or an unre<uited transfer :a unilateral gift;. T!e follo0ing are t!e basic ty'es of economic transactions t!at can be easily identified9 .. ). $. 1. ,. B. Purc!ase or sale of goods or services 0it! a financial <uid 'ro <uo = cas! or a 'romise to 'ay. >2ne real and one financial transfer?. Purc!ase or sale of goods or services in return for goods or services or a barter transaction. >T0o real transfers?. n e6c!ange of financial items e.g. = 'urc!ase of foreign securities 0it! 'ayment in cas! or by a c!e<ue dra0n on a foreign de'osit. >T0o financial transfers?. unilateral gift in (ind >2ne real transfer?. unilateral financial gift. >2ne financial transfer?. Residen"

T!e term resident is not identical 0it! @citiAenB t!oug! normally t!ere is a substantial overla'. s regards individuals7 residents are t!ose individuals 0!ose general centre of interest can be said to rest in t!e given economy. T!ey consume goods and servicesC 'artici'ate in economic activity 0it!in t!e territory of t!e country on ot!er t!an tem'orary basis. T!is definition may turnout to be ambiguous in some cases. T!e @Balance of Payments ManualB 'ublis!ed by t!e @International Monetary FundB 'rovides a set of rules to resolve suc! ambiguities. s regards non8individuals7 a set of conventions !ave been evolved. 3.g. = government and non 'rofit bodies serving resident individuals are residents of res'ective countries7 for enter'rises7 t!e rules are some0!at com'le67 'articularly to t!ose concerning unincor'orated branc!es of foreign multinationals. t!e 'arent located abroad. International organisations li(e t!e 5N7 t!e Dorld Ban(7 and t!e IMF are not considered to be residents of any national economy alt!oug! t!eir offices are located 0it!in t!e territories of any number of countries. To certain economists7 t!e term B2P seems to be some0!at obscure. Yeager7 for e6am'le7 dra0s attention to t!e 0ord E'aymentsF in t!e term B2PC t!is gives a false im'ression t!at t!e set of B2P accounts records items t!at involve only 'ayments. T!e trut! is t!at t!e B2P statements records bot! 'ayments and recei'ts by a country. It is7 as Yeager says7 more a''ro'riate to regard t!e B2P as a @balance of international transactionsB by a country. Similarly t!e 0ord EbalanceF in t!e term B2P does not im'ly t!at a situation of comfortable e<uilibriumC it means t!at it is a balance s!eet of recei'ts and 'ayments !aving an accounting balance. Gi(e ot!er accounts7 t!e B2P records eac! transaction as eit!er a 'lus or a minus. T!e general rule in B2P accounting is t!e follo0ing98 a; b; If a transaction earns foreign currency for t!e nation7 it is a credit and is recorded as a 'lus item. If a transaction involves s'ending of foreign currency it is a debit and is recorded as a negative item. ccording to IMF rules t!ese are considered to be residents of countries in 0!ic! t!ey o'erate7 alt!oug! t!ey are not a se'arate legal entity from

T!e B2P is a double entry accounting statement based on rules of debit and credit similar to t!ose of business accounting H boo(8(ee'ing7 since it records bot! transactions and t!e money flo0s associated 0it! t!ose transactions. t!e B2P statement al0ays balances. T!e various com'onents of a B2P statement are9 . B. C. ". 3. F. Current ccount Ca'ital ccount IMF S"R llocation 3rrors H 2missions Reserves and Monetary +old lso in case of statistical discre'ancy t!e difference amount is adIusted 0it! errors and omissions account and t!us in accounting sense

BALANCE OF TRA#E Balance of trade may be defined as t!e difference bet0een t!e value of goods and services sold to foreigners by t!e residents and firms of t!e !ome country and t!e value of goods and services 'urc!ased by t!em from foreigners. In ot!er 0ords7 t!e difference bet0een t!e value of goods and services e6'orted and im'orted by a country is t!e measure of balance of trade. If t0o sums :.; value of e6'orts of goods and services and :); value of im'orts of goods and services are e6actly e<ual to eac! ot!er7 0e say t!at t!ere is balance of trade e<uilibrium or balanceC if t!e former e6ceeds t!e latter7 0e say t!at t!ere is a balance of trade sur'lusC and if t!e later e6ceeds t!e former7 t!en 0e describe t!e situation as one of balance of trade deficit. Sur'lus is regarded as favourable 0!ile deficit is regarded as unfavourable. T!e above mentioned definition !as been given by /ames. 3. Meade = a Nobel PriAe Britis! 3conomist. -o0ever7 some economists define balance of trade as a difference bet0een t!e value of merc!andise :goods; e6'orts and t!e value of merc!andise im'orts7 ma(ing it t!e same as t!e E+oods BalanceB or t!e @Balance of Merc!andise TradeB. T!ere is n doubt t!at t!e balance of merc!andise trade is of great significance to e6'orting countries7 but still t!e B2T as defined by /. 3. Meade !as greater significance.

Regardless of 0!ic! idea is ado'ted7 one t!ing is certain i.e. t!at balance of trade is a national inIection and !ence it is a''ro'riate to regard an active balance :an e6cess of credits over debits; as a desirable state of affairs. S!ould t!is t!en be ta(en to im'ly t!at a 'assive trade balance :an e6cess of debits over credits; is necessarily a sign of undesirable state of affairs in a countryJ T!e ans0er is @noB. Because7 ta(e for e6am'le7 t!e case of a develo'ing country7 0!ic! mig!t be im'orting vast <uantities of ca'ital goods and tec!nology to build a strong agricultural or industrial base. Suc! a country in t!e course of doing t!at mig!t be forced to e6'erience 'assive or adverse balance of trade and suc! a situation of 'assive balance of trade cannot be described as one of undesirable state of affairs. T!is 0ould t!erefore again suggest t!at before dra0ing meaningful inferences as to 0!et!er 'assive trade balances of a country are desirable or undesirable7 0e must also (no0 t!e com'osition of im'orts 0!ic! are causing t!e conditions of adverse trade balance.

BALANCE OF C$RRENT ACCO$NT B2P on current account refers to t!e inclusion of t!ree balances of namely = Merc!andise balance7 Services balance and 5nilateral Transfer balance. In ot!er 0ords it reflects t!e net flo0 of goods7 services and unilateral transfers :gifts;. T!e net value of t!e balances of visible trade and of invisible trade and of unilateral transfers defines t!e balance on current account. B2P on current account is also referred to as Net Foreign Investment because t!e sum re'resents t!e contribution of Foreign Trade to +NP. T!us t!e B2P on current account includes im'orts and e6'orts of merc!andise :trade balances;7 military transactions and service transactions :invisibles;. T!e service account includes investment income :interests and dividends;7 tourism7 financial c!arges :ban(ing and insurances; and trans'ortation e6'enses :s!i''ing and air travel;. 5nilateral transfers include 'ensions7 remittances and ot!er transfers for 0!ic! no s'ecific services are rendered. It is also 0ort! remembering t!at B2P on current account covers all t!e recei'ts on account of earnings :or o''osed to borro0ings; and all t!e 'ayments arising out of s'ending :as o''osed to lending;. T!ere is no reverse flo0 entailed in t!e B2P on current account transactions.

BASIC BALANCE T!e basic balance 0as regarded as t!e best indicator of t!e economyFs 'osition vis8K8vis ot!er countries in t!e .*,%Fs and t!e .*&%Fs. It is defined as t!e sum of t!e B2P on current account and t!e net balance on long term ca'ital7 0!ic! 0ere considered as t!e most stable elements in t!e balance of 'ayments. 0orsening of t!e basic balance >an increase in a deficit or a reduction in a sur'lus or even a move from t!e sur'lus to deficit? 0as seen as an indication of deterioration in t!e >relative? state of t!e economy. T!e s!ort term ca'ital account balance is not included in t!e basic balance. T!is is 'er!a's for t0o main reasons9 a; S!ort term ca'ital movements unli(e long term ca'ital movements are relatively volatile and un'redictable. T!ey move in and out of t!e country in a 'eriod of less t!an a year or even sooner t!an t!at. It 0ould t!erefore be im'ro'er to treat s!ort term ca'ital movements on t!e same footing as current account B2P transactions 0!ic! are e6tremely durable in nature. Gong term ca'ital flo0s are relatively more durable and t!erefore t!ey <ualify to be treated along side t!e current account transactions to constitute basic balance. b; In many cases7 countries donFt !ave a se'arate s!ort term ca'ital account as t!ey constitute a 'art of t!e @3rrors and 2missions ccount.B deficit on t!e basic balance could come about in various 0ays7 0!ic! are not mutually e<uivalent. 3.g. su''ose t!at t!e basic balance is in deficit because a current account deficit is accom'anied by a deficit on t!e long term ca'ital account. T!e long term ca'ital outflo0 0ill7 in t!e future7 generate 'rofits7 dividends and interest 'ayments 0!ic! 0ill im'rove t!e current account and so7 ceteris 'aribus7 0ill reduce or 'er!a's reduce t!e deficit. 2n t!e ot!er !and7 a basic balance sur'lus consisting of a deficit on current account t!at is more t!an covered by long term borro0ings from abroad may lead to 'roblems in future7 0!en 'rofits7 dividends etc are 'aid to foreign investors.

T%E OFFICIAL SETTLEMENT CONCEPT n alternative a''roac! for indicating7 a deficit or sur'lus in t!e B2P is to consider t!e net monetary transfer t!at !as been made by t!e monetary aut!orities is 'ositive or negative7 0!ic! is t!e so called = settlement conce't.

If t!e net transfer is negative :i.e. t!ere is an outflo0; t!en t!e B2P is said to be in deficit7 but if t!ere is an inflo0 t!en it is sur'lus. T!e basic 'remise is t!at t!e monetary aut!orities are t!e ultimate financers of any deficit in t!e balance of 'ayments :or t!e reci'ients of any sur'lus;. T!ese official settlements are t!us seemed as t!e accommodating item7 all ot!er being autonomous. T!e monetary aut!orities may finance a deficit by de'leting t!eir reserves of foreign currencies7 by borro0ing from t!e IMF or by borro0ing from ot!er foreign monetary aut!orities. T!e later source is of 'articular im'ortance 0!en ot!er monetary aut!orities !old t!e domestic currency as a 'art of t!eir o0n reserves. country 0!ose currency is used as a reserve currency :suc! as t!e dollars of 5S; may be able to run a deficit in its balance of 'ayments 0it!out eit!er de'leting its o0n reserves or borro0ing from t!e IMF since t!e foreign aut!orities mig!t be ready to 'urc!ase t!at currency and add it to its o0n reserves. T!e settlements a''roac! is more relevant under a system of 'egged e6c!ange rates t!an 0!en t!e e6c!ange rates are floating. T%E CAPITAL ACCO$NT T!e ca'ital account records all international transactions t!at involve a resident of t!e country concerned c!anging eit!er !is assets 0it! or !is liabilities to a resident of anot!er country. Transactions in t!e ca'ital account reflect a c!ange in a stoc( = eit!er assets or liabilities. It is often useful to ma(e distinctions bet0een various forms of ca'ital account transactions. T!e basic distinctions are bet0een 'rivate and official transactions7 bet0een 'ortfolio and direct investment and by t!e term of t!e investment :i.e. s!ort or long term;. T!e distinction bet0een 'rivate and official transaction is fairly trans'arent7 and need not concern us too muc!7 e6ce't for noting t!at t!e bul( of foreign investment is 'rivate. "irect investment is t!e act of 'urc!asing an asset and t!e same time ac<uiring control of it :ot!er t!an t!e ability to re8sell it;. T!e ac<uisition of a firm resident in one country by a firm resident in anot!er is an e6am'le of suc! a transaction7 as is t!e transfer of funds from t!e E'arent com'any in order t!at t!e EsubsidiaryF com'any may itself ac<uire assets in its o0n country. Suc! business transactions form t!e maIor 'art of 'rivate direct investment in ot!er countries7 multinational cor'orations being es'ecially im'ortant. T!ere are of course some

e6am'les of suc! transactions by individuals7 t!e most obvious being t!e 'urc!ase of t!e Esecond !omeF in anot!er country. Portfolio investment by contrast is t!e ac<uisition of an asset t!at does not give t!e 'urc!aser control. n obvious e6am'le is t!e 'urc!ase of s!ares in a foreign com'any or of bonds issued by a foreign government. Goans made to foreign firms or governments come into t!e same broad category. Suc! 'ortfolio investment is often distinguis!ed by t!e 'eriod of t!e loan :s!ort7 medium or long are conventional distinctions7 alt!oug! in many cases only t!e s!ort and long categories are used;. T!e distinction bet0een s!ort term and long term investment is often confusing7 but usually relates to t!e s'ecification of t!e asset rat!er t!an to t!e lengt! of time of 0!ic! it is !eld. For e6am'le7 a firm or individual t!at !olds a ban( account 0it! anot!er country and increases its balance in t!at account 0ill be engaging in s!ort term investment7 even if its intention is to (ee' t!at money in t!at account for many years. 2n t!e ot!er !and7 an individual buying a long term government bond in anot!er country 0ill be ma(ing a long term investment7 even if t!at bond !as only one mont! to go before t!e maturity. Portfolio investments may also be identified as eit!er 'rivate or official7 according to t!e sector from 0!ic! t!ey originate. T!e 'urc!ase of an asset in anot!er country7 0!et!er it is direct or 'ortfolio investment7 0ould a''ear as a negative item in t!e ca'ital account for t!e 'urc!asing firmFs country7 and as a 'ositive item in t!e ca'ital account for t!e ot!er country. T!at ca'ital outflo0s a''ear as a negative item in a countryFs balance of 'ayments7 and ca'ital inflo0s as 'ositive items7 often causes confusions. 2ne 0ay of avoiding t!is is to consider t!at direction in 0!ic! t!e 'ayment 0ould go :if made directly;. T!e 'urc!ase of a foreign asset 0ould t!en involve t!e transfer of money to t!e foreign country7 as 0ould t!e 'urc!ase of an :im'orted; good7 and so must a''ear as a negative item in t!e balance of 'ayments of t!e 'urc!aserFs country :and as a 'ositive item in t!e accounts of t!e sellerFs country;. T!e net value of t!e balances of direct and 'ortfolio investment defines t!e balance on ca'ital account.

ACCOMMO#ATIN& ' A$TONOMO$S CAPITAL FLO(S

3conomists !ave often found it useful to distinguis! bet0een autonomous and accommodating ca'ital flo0s in t!e B2P. Transactions are said to is determined inde'endently of t!e B2P. determined by t!e net conse<uences of t!e autonomous items. utonomous if t!eir value ccommodating ca'ital flo0s on t!e ot!er !and are n autonomous transaction is

one underta(en for its o0n sa(e in res'onse to t!e given configuration of 'rices7 e6c!ange rates7 interest rates etc7 usually in order to realise a 'rofit or reduced costs. It does not ta(e into account t!e situation else0!ere in t!e B2P. n accommodating transaction on t!e ot!er !and is underta(en 0it! t!e motive of settling t!e imbalance arising out of ot!er transactions. n alternative nomenclature is t!at ca'ital flo0s are Eabove t!e lineF :autonomous; or Ebelo0 t!e lineF :accommodating;. 2bviously t!e sum of t!e accommodating and autonomous items must be Aero7 since all entries in t!e B2P account must come under one of t!e t0o !eadings. D!et!er t!e B2P is in sur'lus or deficit de'ends on t!e balance of t!e autonomous items. T!e B2P is said to be in sur'lus if autonomous recei'ts are greater t!an t!e autonomous 'ayments and in deficit if vice = a = versa. 3ssentially t!e distinction bet0een bot! t!e ca'ital flo0 lies in t!e motives underlying a transaction7 0!ic! are almost im'ossible to determine. De cannot attac! t!e labels to 'articular grou's of items in t!e B2P accounts 0it!out giving t!e matter some t!oug!t. For e6am'le a s!ort term ca'ital movement could be a reaction to difference in interest rates bet0een t0o countries. If t!ose interest rates are largely determined by influences ot!er t!an t!e B2P7 t!en suc! a transaction s!ould be labelled as autonomous. 2t!er s!ort term ca'ital movements may occur as a 'art of t!e financing of a transaction t!at is itself autonomous :say7 t!e e6'ort of some good;7 and as suc! s!ould be classified as accommodating. T!ere is nevert!eless a great tem'tation to assign t!e labels EautonomousF and EaccommodatingF to grou's of item in t!e B2P. i.e. to assume7 t!at t!e great maIority of trade in goods and of long term ca'ital movements are autonomous7 and t!at most s!ort term ca'ital movements are accommodating7 so t!at 0e s!all not go far 0rong by assigning t!ose labels to t!e various com'onents of t!e B2P accounts. D!et!er t!at is a reasonable a''ro6imation to t!e trut! may de'end in 'art on t!e 'olicy regime t!at is in o'eration. For e6am'le 0!at is an autonomous item under a system of fi6ed e6c!ange rates and limited ca'ital mobility may not be autonomous 0!en t!e e6c!ange rates are floating and ca'ital may move freely bet0een countries.

BALANCE OF IN)ISIBLE TRA#E /ust as a country e6'orts goods and im'orts goods a country also e6'orts and im'orts 0!at are called as services :invisibles;. T!e service account records all t!e service e6'orted and im'orted by a country in a year. 5nli(e goods 0!ic! are tangible or visible services are intangible. ccordingly services transactions are regarded as invisible items in t!e B2P. T!ey are invisible in t!e sense t!at service recei'ts and 'ayments are not recorded at t!e 'ort of entry or e6it as in t!e case 0it! t!e merc!andise im'orts and e6'orts recei'ts. 36ce't for t!is t!ere is no meaningful difference bet0een goods and services recei'ts and 'ayments. Bot! constitute earning and s'ending of foreign e6c!ange. +oods and services accounts toget!er constitute t!e largest and economically t!e most significant com'onents in t!e B2P of any country. T!e service transactions ta(e various forms. T!ey basically include .; trans'ortation7 ban(ing7 and insurance recei'ts and 'ayments from and to t!e foreign countries7 ); tourism7 travel services and tourist 'urc!ases of goods and services received from foreign visitors to !ome country and 'aid out in foreign countries by !ome country citiAens7 $; e6'enses of students studying abroad and recei'ts from foreign students studying in t!e !ome country7 1; e6'enses of di'lomatic and military 'ersonnel stationed overseas as 0ell as t!e recei'ts from similar 'ersonnel 0!o are stationed in t!e !ome country and ,; interest7 'rofits7 dividends and royalties received from foreign countries and 'aid out to foreign countries. T!ese items are generally termed as investment income or recei'ts and 'ayments arising out of 0!at are called as ca'ital services. @Balance of Invisible TradeB is a sum of all invisible service recei'ts and 'ayments in 0!ic! t!e sum could be 'ositive or negative or Aero. terms are descri'tive as 0ell as 'rescri'tive. 'ositive sum is regarded as favourable to a country and a negative sum is considered as unfavourable. T!e

BALANCE OF )ISIBLE TRA#E Balance of visible trade is also (no0n as balance of merc!andise trade7 and it covers all transactions related to movable goods 0!ere t!e o0ners!i' of goods c!anges from residents to non8residents :e6'orts; and from non8residents to residents :im'orts;. T!e valuation s!ould be on F.2.B basis so t!at international freig!t and insurance are treated as distinct services and not merged 0it! t!e value of goods t!emselves. 36'orts valued on F.2.B basis are t!e

credit entries. "ata for t!ese items are obtained from t!e various forms t!at t!e e6'orters !ave fill and submit to t!e designated aut!orities. Im'orts valued at C.I.F are t!e debit entries. Laluation at C.I.F. t!oug! ina''ro'riate7 is a forced c!oice due to data inade<uacies. T!e difference bet0een t!e total of debits and credits a''ears in t!e @NetB column. T!is is t!e EBalance of Lisible Trade.F In visible trade if t!e recei'ts from e6'orts of goods !a''en to be e<ual to t!e 'ayments for t!e im'orts of goods7 0e describe t!e situation as one of Aero @goods balance.F 2t!er0ise t!ere 0ould be eit!er a 'ositive or negative goods balance7 de'ending on 0!et!er 0e !ave recei'ts e6ceeding 'ayments :'ositive; or 'ayments e6ceeding recei'ts :negative;.

ERRORS AN# OMISSIONS 3rrors and omissions is a @statistical residue.B It is used to balance t!e statement because in 'ractice it is not 'ossible to !ave com'lete and accurate data for re'orted items and because t!ese cannot7 t!erefore7 ordinarily !ave e<ual entries for debits and credits. T!e entry for net errors and omissions often reflects unre'orted flo0s of 'rivate ca'ital7 alt!oug! t!e conclusions t!at can be dra0n from t!em vary a great deal from country to country7 and even in t!e same country from time to time7 de'ending on t!e reliability of t!e re'orted information. "evelo'ing countries7 in 'articular7 usually e6'erience great difficulty in 'roviding reliable information. 3rrors and omissions :or t!e balancing item; reflect t!e difficulties involved in recording accurately7 if at all7 a 0ide variety of transactions t!at occur 0it!in a given 'eriod of :usually .) mont!s;. In some cases t!ere is suc! large number of transactions t!at a sam'le is ta(en rat!er t!an recording eac! transaction7 0it! t!e inevitable errors t!at occur 0!en sam'les are used. In ot!ers 'roblems may arise 0!en one or ot!er of t!e 'arts of a transaction ta(es more t!an one year9 for e6am'le 0it a large e6'ort contract covering several years some 'ayment may be received by t!e e6'orter before any deliveries are made7 but t!e last 'ayment 0ill not made until t!e contract !as been com'leted. "is!onesty may also 'lay a 'art7 as 0!en goods are smuggled7 in 0!ic! case t!e merc!andise side of t!e transaction is unre'orted alt!oug! 'ayment 0ill be made some!o0 and 0ill be reflected some0!ere in t!e accounts. Similarly t!e desire to avoid ta6es may lead to under8re'orting of some items in order to reduce ta6 liabilities.

Finally7 t!ere are c!anges in t!e reserves of t!e country 0!ose balance of 'ayments 0e are considering7 and c!anges in t!at 'art of t!e reserves of ot!er countries t!at is !eld in t!e country concerned. Reserves are !eld in t!ree forms9 in foreign currency7 usually but al0ays t!e 5S dollar7 as gold7 and as S'ecial "e'osit Recei'ts :S"RFs; borro0ed from t!e IMF. Note t!at reserves do not !ave to be !eld 0it!in t!e country. Indeed most countries !old a 'ro'ortion of t!eir reserves in accounts 0it! foreign central ban(s. T!e c!anges in t!e countryFs reserves must of course reflect t!e net value of all t!e ot!er recorded items in t!e balance of 'ayments. T!ese c!anges 0ill of course be recorded accurately7 and it is t!e discre'ancy bet0een t!e c!anges in reserves and t!e net value of t!e ot!er record items t!at allo0s us to identify t!e errors and omissions.

$NILATERAL TRANSFERS 5nilateral transfers or Eunre<uited recei'tsF7 are recei'ts 0!ic! t!e residents of a country receive Efor freeF7 0it!out !aving to ma(e any 'resent or future 'ayments in return. Recei'ts from abroad are entered as 'ositive items7 'ayments abroad as negative items. T!us t!e unilateral transfer account includes all gifts7 grants and re'aration recei'ts and 'ayments to foreign countries. 5nilateral transfer consist of t0o ty'es of transfers9 :a; government transfers :b; 'rivate transfers. Foreign economic aid or assistance and foreign military aid or assistance received by t!e !ome countryFs government :or given by t!e !ome government to foreign governments; constitutes government to government transfers. T!e 5nited States foreign aid to India7 for B2P *but a debit item in t!e 5S B2P;. T!ese are government to government donations or gifts. T!ere no 0ell 0or(ed out t!eory to e6'lain t!e be!aviour of t!is account because t!ese flo0s de'end u'on 'olitical and institutional factors. T!e government donations :or aid or assistance; given to government of ot!er countries is mi6ed bag given for eit!er economic or 'olitical or !umanitarian reasons. Private transfers7 on t!e ot!er !and7 are funds received from or remitted to foreign countries on 'erson =to ='erson basis. inflo0 item in t!e Malaysian B2P. transfer causing a debit flo0 in t!e n Malaysian settled in t!e 5nited States remitting M.%% a mont! to !is aged 'arents in Malaysia is a unilateral transfer merican 'ensioner 0!o is settled after retirement in merica is also a 'rivate unilateral merican B2P but a credit flo0 in t!e Italian B2P. say Italy and 0!o is receiving mont!ly 'ension from

Countries t!at attract retired 'eo'le from ot!er nations may t!erefore e6'ect to receive an influ6 of foreign recei'ts in t!e form of 'ension 'ayments. nd countries 0!ic! render foreign economic assistance on a massive scale can e6'ect !uge deficits in t!eir unilateral transfer account. 5nilateral transfer recei'ts and 'ayments are also called unre<uited transfers because as t!e name itself suggests t!e flo0 is only in one direction 0it! no automatic reverse flo0 in t!e ot!er direction. T!ere is no re'ayment obligation attac!ed to t!ese transfers because t!ey are not borro0ings and lendingFs but gifts and grants e6c!anged bet0een government and 'eo'le in one country 0it! t!e governments and 'eo'les in t!e rest of t!e 0orld.

ILL$STRATE T%E ITEMS (%IC% FALL $N#ER CAPITAL ACCO$NT AN# C$RRENT ACCO$NT (IT% E*AMPLES. Credits Current ccount Merc!andise 36'orts :Sale of +oods; Invisible 36'orts :Sale of Services; a. b. c. Trans'ort services sold abroad "ebits Current ccount .. Merc!andise Im'orts :'urc!ase of +oods; ). Invisible Im'orts :Purc!ase of Services; a. Trans'ort services 'urc!ased from abroad b. Insurance services 'urc!ased c. Tourist e6'enditure abroad d. abroad Incomes received on loans and e. Income 'aid on loans and investments abroad. investments in t!e !ome country. $. 5nilateral Transfers $. 5nilateral Transfers a. Private remittances received from a. Private remittances abroad abroad b. Pension 'ayments received from b. Pension 'ayments abroad abroad c. +overnment grants received from c. +overn abroad ment grants abroad. Ca'ital ccount Ca'ital ccount $. Foreign long8term investments in t!e $. Gong8term investments abroad :less !ome country :less redem'tions and redem'tions and re'ayments; re'ayments; a. "irect investments in t!e a. "irect Investments abroad !ome country b. Foreign investments in b. Investments in foreign domestic securities securities e. 2t!er services 'urc!ased from

.. ).

Insurance services sold abroad Foreign tourist e6'enditure in country d. 2t!er services sold abroad

2t!er investments of foreigners in t!e !ome country d. Foreign +overnmentsF loans to t!e !ome country. 1. Foreign s!ort8term investments in t!e !ome country.

c.

c. d.

2t!er investments abroad

+overnment loans to foreign countries 1. S!ort8term investments abroad.

CAPITAL ACCO$NT CON)ERTIBILITY +CAC, D!ile t!ere is no formal definition of Ca'ital ccount Convertibility7 t!e committee under t!e c!airmans!i' of S.S. Tara'ore !as recommended a 'ragmatic 0or(ing definition of C C. ccordingly C C refers to t!e freedom to convert local financial assets into foreign financial assets and vice = a = versa at mar(et determined rates of e6c!ange. It is associated 0it! c!anges of o0ners!i' in foreign N domestic financial assets and liabilities and embodies t!e creation and li<uidation of claims on7 or by7 t!e rest of t!e 0orld. C C is coe6istent 0it! restrictions ot!er t!an on e6ternal 'ayments. It also does not 'reclude t!e im'osition of monetary N fiscal measures relating to foreign e6c!ange transactions7 0!ic! are of 'rudential nature. Follo0ing are t!e 'rere<uisites for C C9 .. ). $. 1. ,. &. Maintenance of domestic economic stability. de<uate foreign e6c!ange reserves. Restrictions on inessential im'orts as long as t!e foreign e6c!ange 'osition is not very comfortable. Comfortable current account 'osition. n a''ro'riate industrial 'olicy and a conducive investment climate. n out0ard oriented develo'ment strategy and sufficient incentives for e6'ort gro0t!.

"3SCRIPTIL3 453STI2NS
#ISC$SS T%E RELE)ANCE - IMPORTANCE OF T%E BOP STATEMENTS. B2P statistics are regularly com'iled7 'ublis!ed and are continuously monitored by com'anies7 ban(s and government agencies. set of B2P accounts is useful in t!e same 0ay as a motion 'icture camera. T!e accounts do not tell us 0!at is good or bad7 nor do t!ey tell us 0!at is causing 0!at. But t!ey do let us see 0!at is !a''ening so t!at 0e can reac! our o0n conclusions. Belo0 are $ instances 0!ere t!e information 'rovided by B2P accounting is very necessary9 .. /udging t!e stability of a floating e6c!ange rate system is easier 0it! B2P as t!e record of e6c!anges t!at ta(e 'lace bet0een nations !el' trac( t!e accumulation of currencies in t!e !ands of t!ose individuals more 0illing to !old on to t!em. ). /udging t!e stability of a fi6ed e6c!ange rate system is also easier 0it! t!e same record of international e6c!ange. T!ese e6c!anges again s!o0 t!e e6tent to 0!ic! a currency is accumulating in foreign !ands7 raising <uestions about t!e ease of defending t!e fi6ed e6c!ange rate in a future crisis. $. To s'ot 0!et!er it is becoming more difficult for debtor counties to re'ay foreign creditors7 one needs a set of accounts t!at s!o0s t!e accumulation of debts7 t!e re'ayment of interest and 'rinci'al and t!e countries ability to earn foreign e6c!ange for future re'ayment. set of B2P accounts su''lies t!is information. T!is 'oint is furt!er elaborated belo0. T!e B2P statement contains useful information for financial decision ma(ers. In t!e s!ort run7 B2P deficit or sur'luses may !ave an immediate im'act on t!e e6c!ange rate. Basically7 B2P records all transactions t!at create demand for and su''ly of a currency. D!en e6c!ange rates are mar(et determined7 B2P figures indicate e6cess demand or su''ly for t!e currency and t!e 'ossible im'act on t!e e6c!ange rate. Ta(en in conIunction 0it! recent 'ast data7 t!ey may conform or indicate a reversal of 'erceived trends. T!ey also signal a 'olicy s!ift on t!e 'art of t!e monetary aut!orities of t!e country unilaterally or in concert 0it! its trading 'artners. For instance7 a country facing a current account deficit may raise interest to attract s!ort term ca'ital inflo0s to 'revent de'reciation of its currency. Countries suffering from c!ronic deficits may find t!eir credit ratings being do0ngraded because t!e mar(ets inter'ret t!e data as evidence t!at t!e country may !ave difficulties its debt.

B2P accounts are intimately 0it! t!e overall saving investment balance in a countryFs national accounts. Continuing deficits or sur'luses may lead to fiscal and monetary actions designed to correct t!e imbalance 0!ic! in turn 0ill affect e6c!ange rates and interest rates in t!e country. In nuts!ell cor'orate finance managers must monitor t!e B2P data being 'ut out by government agencies on a regular basis because t!ey !ave bot! s!ort term and long term im'lications for a !ost of economic and financial variables affecting t!e fortunes of t!e com'any.

IN T%E ACCO$NTIN& SENSE T%E BOP AL(AYS BALANCES/ T!e B2P is a double entry accounting statement based on rules of debit and credit similar to t!ose of business accounting H boo(8(ee'ing7 since it records bot! transactions and t!e money flo0s associated 0it! t!ose transactions. For instance7 e6'orts :li(e sales of a business; are credits7 and im'orts :li(e t!e 'urc!ases of a business; are debits. s in business accounting t!e B2P records increases in assets :direct investment abroad; and decreases in liabilities :re'ayment of debt; as debits7 and decreases in assets :sale of foreign securities; and increases in liabilities :t!e utilisation of foreign goods; as credits. n elementary rule t!at may assist in understanding t!ese conventions is t!at in suc! transactions it is t!e movement of a document7 not of t!e money t!at is recorded. n investment made abroad involves t!e im'ort of a documentary ac(no0ledgement of t!e investment7 it is t!erefore a debit. T!e B2P !as one im'ortant category t!at !as no counter 'art or at least no significant counter 'art in business accounting7 i.e. international gifts and grants and ot!er so called transfer 'ayments. In general credits may be conceived as recei'ts and debits as 'ayments. -o0ever t!is is not al0ays 'ossible. In 'articular t!e c!ange in a countryFs international reserves in gold and foreign e6c!ange is treated as a debit if it is an increase and a credit if it is a decrease. T!e 'rocedure is to offset c!anges in reserves against c!anges in t!e ot!er items in t!e table so t!at t!e grand total is al0ays Aero7 :e6ce't for errors and omissions;. transaction entering t!e B2P usually !as t0o as'ects and invariably gives rise to t0o entries7 one a debit and t!e ot!er a credit. 2ften t!e t0o as'ects fall in different categories. For instance7 an e6'ort against cas! 'ayment may result in an increase in t!e e6'orting countryFs official foreign e6c!ange !oldings. Suc! a transaction is entered in t!e B2P as a

credit for e6'orts and as a debit for t!e ca'ital account. Bot! as'ects of a transaction may sometimes be a''ro'riate to t!e same account. For instance t!e 'urc!ase of a foreign security may !ave as its counter 'art reduction in official foreign e6c!ange !oldings. T!us it is clear t!at if 0e record all t!e entries in B2P in a 'ro'er 0ay7 debits and credits 0ill al0ays be e<ual. So t!at in accounting sense t!e B2P 0ill be in balance.

#ETAILE# O$TLINE OF T%E BOP STATEMENT ' S$B ACCO$NTS Balance of Payments is t!e summary of all t!e transactions bet0een t!e residents of one country and rest of t!e 0orld for a given 'eriod of time7 usually one year. :revised; includes t!e follo0ing sub accounts7 as s!o0n in t!e table belo0. Items +. Current ccount Merc!andise a. Private b. +overnment ). Invisibles a. Travel b. Trans'ortation c. Insurance d. Investment Income e. +overnment :not included else0!ere; f. Miscellaneous $. Transfer Payments a. 2fficial b. Private Total Current ccount :.O)O$; .. -. Ca'ital ccount ). Private a. b. $. Ban(ing 1. 2fficial a. Goans b. mortisation c. Miscellaneous Total Ca'ital ccount :.O)O$; I. /. P. Credits "ebits Net B2P statement

Gong Term S!ort Term

IMF S"R llocation Ca'ital ccount7 IMF H S"R llocation :BOCO";

G. M. N.

Total Current ccount7 Ca'ital ccount7 IMF H S"R llocation : O3; 3rrors H 2missions Reserves and Monetary +old

Current ccount T!e current account includes all transactions 0!ic! give rise to or use u' national income. T!e current account consists of t0o maIor items7 namely7 :a; merc!andise e6'ort and im'orts and :b; invisible im'orts and e6'orts. Merc!andise e6'orts i.e. sale of goods abroad7 are credit entries because all transactions giving rise to monetary claims on foreigners re'resent credits. 2n t!e ot!er !and7 merc!andise im'orts7 i.e. 'urc!ase of goods abroad7 are debit entries because all transactions giving rise to foreign money claims on t!e !ome country re'resent debits. Merc!andise e6'orts and im'orts form t!e most im'ortant international transactions of most of t!e countries. Invisible e6'orts i.e. sale of services7 are credit entries and invisible im'orts i.e. 'urc!ase of services are debit entries. Im'ortant invisible e6'orts include sale abroad of services li(e insurance and trans'ort etc. 0!ile im'ortant invisible im'orts are foreign tourist e6'enditures in t!e !ome country and income received on loans and investment abroad :interests or dividends;. Transfers 'ayments refer to unre<uited recei'ts or unre<uited 'ayments 0!ic! may be in cas! or in (ind and are divided into official and 'rivate transactions. Private transfer 'ayments cover suc! transactions as c!aritable contributions and remittances to relatives in ot!er countries. T!e main com'onent of government transfer 'ayments is economic aid in t!e form of grants. Ca'ital ccount T!e ca'ital account se'arates t!e non monetary sector from t!e monetary one7 t!at is to say7 t!e trading or ordinary 'rivate business element in t!e economy toget!er 0it! t!e ordinary institutions of central or local government7 from t!e central ban( and t!e commercial ban(7 0!ic! are directly involved in framing or im'lementing monetary 'olicies. T!e ca'ital

account consists of long term and s!ort term ca'ital transactions. Ca'ital outflo0 re'resents debit and ca'ital inflo0 re'resent credit. For instance7 if an merican firm invests ru'ees .%% million in India7 t!is transaction 0ill be re'resented as a debit in t!e 5S B2P and a credit in t!e B2P of India. 2t!er ccounts T!e IMF account contains 'urc!ases :credits; and re'urc!ases :debits; from t!e IMF. S"Rs = S'ecial "ra0ing Rig!ts = are a reserve asset created by t!e IMF and allocated from time to time to member countries. Dit!in certain limitations it can be used to settle international 'ayments bet0een monetary aut!orities of member countries. n allocation is a credit 0!ile retirement is a debit. T!e Reserve and Monetary +old account records increases :debits; and decreases :credits; in reserve assets. Reserve assets consist of RBIFs !oldings of gold and foreign e6c!ange :in t!e form of balances 0it! foreign central ban(s and investment in foreign government securities; and governmentFs !olding of S"Rs. 3rrors and 2missions is a @statistical residue.B 3rrors and omissions :or t!e balancing item; reflect t!e difficulties involved in recording accurately7 if at all7 a 0ide variety of transactions t!at occur 0it!in a given 'eriod of :usually .) mont!s;. It is used to balance t!e statement because in 'ractice it is not 'ossible to !ave com'lete and accurate data for re'orted items and because t!ese cannot7 t!erefore7 ordinarily !ave e<ual entries for debits and credits.

%O( (ILL YO$ I#ENTIFY A #EFICIT OR S$RPL$S IN BALANCE OF PAYMENTS. - MEANIN& OF #EFICIT AN# S$RPL$S IN T%E BALANCE OF PAYMENTS. If t!e balance of 'ayment is a double entry accounting record7 t!en a'art from errors and omissions7 it must al0ays balance. 2bviously7 t!e terms @deficitB or @sur'lusB cannot refer to t!e entire B2P but must indicate imbalance on a subset of accounts included in t!e B2P. T!e @imbalanceB must be inter'reted in some sense as an economic dise<uilibrium. Since t!e notion of dise<uilibrium is usually associated 0it!in a situation t!at calls for 'olicy intervention of some sort7 it is im'ortant to decide 0!at is t!e o'timal 0ay of grou'ing t!e various accounts 0it!in t!e B2IP so t!at an imbalance in one set of accounts 0ill give t!e a''ro'riate signals to t!e 'olicy ma(ers. In t!e language of an accountant e divide t!e entire B2P into a set of accounts @above t!e lineB and anot!er set @belo0 t!e line.B If t!e net

balance :credits8debits; is 'ositive above t!e line 0e 0ill say t!at t!ere is a @balance of 'ayments sur'lusBC if it is negative e 0ill say t!ere is a @balance of 'ayments deficit.B T!e net balance belo0 t!e line s!ould be e<ual in magnitude and o''osite in sign to t!e net balance above t!e line. T!e items belo0 t!e line can be said to be a @com'ensatoryB nature = t!ey @financeB or @settleB t!e imbalance above t!e line. T!e critical <uestion is !o0 to ma(e t!is division so t!at B2P statistics7 in 'articular t!e deficit and sur'lus figures7 0ill be economically meaningful. Suggestions made by economist and incor'orated into t!e IMF guidelines em'!asis t!e 'ur'ose or motive a transaction7 as a criterion to decide 0!et!er a transaction s!ould go above or belo0 t!e line. T!e 'rinci'le distinction bet0een @autonomousB transaction and @accommodatingB or com'ensatory transactions. Transactions are said to of t!e B2P. utonomous if t!eir value is determined inde'endently n autonomous transaction is one underta(en for its ccommodating ca'ital flo0s on t!e ot!er !and are determined by t!e net

conse<uences of t!e autonomous items.

o0n sa(e in res'onse to t!e given configuration of 'rices7 e6c!ange rates7 interest rates etc7 usually in order to realise a 'rofit or reduced costs. It does not ta(e into account t!e situation else0!ere in t!e B2P. n accommodating transaction on t!e ot!er !and is underta(en 0it! n alternative t!e motive of settling t!e imbalance arising out of ot!er transactions.

nomenclature is t!at ca'ital flo0s are Eabove t!e lineF :autonomous; or Ebelo0 t!e lineF :accommodating;. T!e terms @balance of 'ayments deficitB and @balance of 'ayments sur'lusB 0ill t!en be understood to mean deficit or sur'lus on all autonomous transactions ta(en toget!er. T!e ot!er measures of identifying a deficit or sur'lus in t!e B2P statement are9 "eficit or Sur'lus in t!e C0rren" A o0n" andNor Trade A o0n". T!e Basi Ba1an e 0!ic! s!o0s t!e relative deficit or sur'lus in t!e B2P.

A #EFICIT IN T%E BASIC BALANCE IS #ESIRABLE OR $N#ESIRABLE/ T!e basic balance 0as regarded as t!e best indicator of t!e economyFs 'osition vis8K8vis ot!er countries in t!e .*,%Fs and t!e .*&%Fs. It is defined as t!e sum of t!e B2P on current account and t!e net balance on long term ca'ital7 0!ic! 0ere considered as t!e most stable elements in t!e balance of 'ayments.

0orsening of t!e basic balance >an increase in a deficit or a reduction in a sur'lus or even a move from t!e sur'lus to deficit? is seen as an indication of deterioration in t!e >relative? state of t!e economy. T!us it is very muc! evident t!at a deficit in t!e basic balance is a clear indicator of 0orsening of t!e state of t!e countryFs B2P 'osition7 and t!us can be said to be undesirable at t!e very outset. -o0ever7 on furt!er t!oug!ts7 a deficit in t!e basic balance can also be understood to be desirable. T!is can be e6'lained as follo0s9 deficit on t!e basic balance could come about in various 0ays7 0!ic! are not mutually e<uivalent. 3.g. su''ose t!at t!e basic balance is in deficit because a current account deficit is accom'anied by a deficit on t!e long term ca'ital account. T!is deficit in long term ca'ital account could be clearly observed in a develo'ing countryFs 0!ic! mig!t be investing !eavily on ca'ital goods for advancement on t!e agricultural and industrial fields. T!is long term ca'ital outflo0 0ill7 in t!e future7 generate 'rofits7 dividends and interest 'ayments 0!ic! 0ill im'rove t!e current account and so7 ceteris 'aribus7 0ill reduce or 'er!a's reduce t!e deficit. T!us a deficit in basic balance can be desirable as 0ell as undesirable7 as it clearly de'ends u'on 0!at is leading to a deficit in t!e long term ca'ital account.

S-2RT N2T3S
BALANCE OF PAYMENTS :Refer to Conce't 4uestions;

C$RRENT ACCO$NT T!e current account records e6'orts and im'orts of goods and services and unilateral transfers. 36'orts 0!et!er of goods or services are by convention entered as 'ositive items in t!e account. Im'orts accordingly are entered as negative items. 36'orts are normally calculated f.o.b i.e. cost from trans'ortation7 insurance etc are not included 0!ereas im'orts are normally calculated c.i.f. i.e. trans'ortation7 insurance cost etc are included.

In many cases t!e 'ayment for im'orts and e6'orts 0ill result in transfer of money bet0een t!e trading countries. For e6am'le a 5P firm im'orting a good from 5S may settle its debt by instructing its 5P ban( to ma(e a 'ayment to t!e 5S account of t!e e6'orter. T!is is not necessarily t!e case !o0ever. If t!e 5P firm !olds a ban( account in t!e 5S7 t!en it may ma(e 'ayment to t!e 5S e6'orter from t!at account. In t!e former case t!e financial side of t!e transaction 0ill a''ear in t!e 5P B2P account as 'art of t!e net c!ange in 5P foreign currency reserves. In t!e later it 0ill a''ear as t!e 'art of t!e ca'ital account since t!e 5P firm !as reduced its claims on t!e 5S ban(. B2P accounts usually differentiate bet0een trades in goods and trade in services. T!e balance of im'orts and e6'orts of t!e former is referred to in t!e 5P accounts as t!e balance of visible trade in ot!er countries it may be referred to as t!e balance of merc!andise trade7 or sim'ly as t!e balance of trade. T!e net balance of e6'orts and im'orts of services is called t!e balance of invisible trade in t!e 5P statistics. Invisible trade is a muc! more !eterogeneous category t!an is visible trade. It !el's in distinguis!ing bet0een factor and non8factor services. Trade in t!e later of 0!ic! s!i''ing7 ban(ing and insurance services and 'ayments by residents as tourists abroad are usually t!e most im'ortant7 is in economic terms little different from trade in goods. T!at is7 e6'orts and im'orts are flo0s of out'uts 0!ose values 0ill be determined by t!e same variables t!at 0ould affect t!e demand and su''ly for goods. Factors services7 0!ic! consist in t!e main of interest7 'rofits and dividends7 are on t!e ot!er !and 'ayments for in'uts. 36'orts and im'orts of suc! services 0ill de'end in large 'art on t!e accumulated stoc( of 'ast investment in and borro0ing from foreign residents. 5nilateral transfer forms a maIor 'art of t!e current account. It refers to unre<uited recei'ts or unre<uited 'ayments 0!ic! may be in cas! or in (ind and are divided into official and 'rivate transactions. 5nilateral transfers or Eunre<uited recei'tsF7 are recei'ts 0!ic! t!e residents of a country receive Efor freeF7 0it!out !aving to ma(e any 'resent or future 'ayments in return. Recei'ts from abroad are entered as 'ositive items7 'ayments abroad as negative items. T!e net value of t!e balances of visible trade and of invisible trade and of unilateral transfers defines t!e balance on current account.

CAPITAL ACCO$NT :Refer to Conce't 4uestions;

OFFICIAL RESER)ES ACCO$NT 2fficial reserve account forms a s'ecial feature of t!e ca'ital account. T!is account records t!e c!anges in t!e 'art of t!e reserves of ot!er countries t!at is !eld in t!e country concerned. T2ese reserves are 2e1d in "2ree for!s3 in forei4n 0rren 56 0s0a115 70" no" a18a5s "2e $S do11ars6 as 4o1d6 and as S9e ia1 #e9osi" Re ei9"s +S#Rs, 7orro8ed fro! "2e IMF. Note t!at t!e reserves do not !ave to be !eld by t!e country. Indeed most of t!e countries !old a 'ro'ortion of t!e reserves in accounts 0it! foreign central ban(s. T!e IMF account contains 'urc!ases :credits; and re'urc!ases :debits; from t!e IMF. S"Rs = S'ecial "ra0ing Rig!ts = are a reserve asset created by t!e IMF and allocated from time to time to member countries. Dit!in certain limitations it can be used to settle international 'ayments bet0een monetary aut!orities of member countries. n allocation is a credit 0!ile retirement is a debit. T!e Reserve and Monetary +old account records increases :debits; and decreases :credits; in reserve assets. Reserve assets consist of RBIFs !oldings of gold and foreign e6c!ange :in t!e form of balances 0it! foreign central ban(s and investment in foreign government securities; and governmentFs !olding of S"Rs. T!e c!ange in t!e reserves account measures a nationFs sur'lus or deficit on its current and ca'ital account transactions by netting reserve liabilities from reserve assets. For e6am'le7 a sur'lus 0ill lead to an increase in official !oldings of foreign currencies andNor goldC a deficit 0ill normally cause a reduction in t!ese assets. For most of t!e countries7 t!ere is a correlation bet0een balance8of8'ayments deficits and reserve declines. dro' in reserves 0ill occur7 for instance7 0!en a nation sells gold to ac<uire foreign currencies t!at it can use to meet t!e deficit in t!e balance of 'ayments.

BIBLIO&RAP%Y
Balance of Payments 8 Paul Madson International Financial Management 8 P + 'te International 3conomics 8 Gindert International 3conomics 8 Francis C!ernuliam International 3conomics 8 C P Pindelberger International 3conomics 8 +eoffrey Reed International 3conomics 8 - + Mannur