International Business

Balance of Payments
 Balance of Payments
 BoP is a systematic record of all economic
transactions in a period between a country
and rest of the world
 Introduction
 The measurement of all international
economic transactions between the
residents of a country and foreign
residents is called the balance of
payments (BOP)
 The two major sub accounts of the
balance of payments are:
 Current account
 Capital account
 Fundamentals of Balance of
Payments Accounting
BoP is a record of international payments made
due to various international transactions. Incoming
payments are credits and outgoing debits.
Debits > Credits, then BoP in deficit or
unfavourable
Credits > Debits, then BoP in surplus or favourable
Therefore during deficit BoP, demand of foreign
exchange>supply, so rate of exchange will rise.
*
 Methods Of Correcting
BoP Disequilibrium
 Deflation
 Depreciation
 Devaluation
 Exchange Control
 Capital Movement
 Exchange Control
 Capital Movement
 Encouraging Exports
 Discouraging Imports by putting Import
Duties, Import Quotas, ImportSubstitution.