Balance of Payments
The balance of payments (BOP) is a statement of all transactions made between entities in one country and the rest of the world over a defined period of time, usually a year. It is used to analyze a country’s international trade and investment position. The balance of payments is divided into two accounts: the current account and the capital account. The current account includes all transactions related to the import and export of goods and services, while the capital account includes all transactions related to investments and other financial assets.
History of the Term
The concept of the balance of payments was first developed by the British economist, John Maynard Keynes, in the early 20th century. Keynes argued that a country’s balance of payments should be balanced, meaning that the value of its exports should equal the value of its imports. This concept was later adopted by the International Monetary Fund (IMF) and is now used by most countries to measure their international trade and investment position.
Comparison Table
| Account | Inflows | Outflows |
|---|---|---|
| Current Account | Exports of Goods & Services | Imports of Goods & Services |
| Capital Account | Foreign Investment | Domestic Investment |
Summary
The balance of payments is an important tool for analyzing a country’s international trade and investment position. It is divided into two accounts: the current account and the capital account. The current account includes all transactions related to the import and export of goods and services, while the capital account includes all transactions related to investments and other financial assets. For more information about the balance of payments, please visit the websites of the International Monetary Fund (IMF) and the World Bank.
See Also
- Current Account
- Capital Account
- International Trade
- Foreign Investment
- Exchange Rate
- Gross Domestic Product (GDP)
- International Monetary Fund (IMF)
- World Bank
- Trade Balance
- Balance of Trade
