1. Provide the definition of a balance of payments

1. Provide the definition of a balance of payments and its different accounts and discuss its importance.

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Instructions:

Select a country of your chosen (other than the United States), and extract its balance of payments for the last 8 to 12 years (based on data availability).

You can use the website of the International Monetary Fund (IMF) of the website of the Central Bank of the country you selected.

 

 http://data.imf.org/?sk=7A51304B-6426-40C0-83DD-CA473CA1FD52&ss=1409773422141

  1. Provide the definition of a balance of payments and its different accounts and discuss its importance.
  2. Analyze the country’s current account, capital account, financial account and overall balance. What causes the shifts in these accounts? Use graphs.
  3. Discuss the relationship between shifts in the current accounts balances and shifts in financing accounts. Report your graphs.
  4. How did the government use its reserves to balance the BOP?
  5. Extract data on the country’s economic growth. What is the relationship between the trade balance and the economic growth
  6. For the selected years, discuss the relationship between the BOP and exchange rate movement of the local currency against the USD. Average annual exchange rates can be found on the website of the World Bank:

 http://data.worldbank.org/indicator/PA.NUS.FCRF

Other websites offer daily exchange rates information (example: IMF) Use graphs or regressions.

7. Report inflation rates data for the years selected. Is there any observable relationship between the balance of payments accounts and inflation rates?

8. What is the country’s policy in regard to capital mobility (capital flows in and out of the country)? If controls exist, what is their impact on the currency movements?

 

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