Australia's Current Account

Use the following data from the International Monetary Fund to answer questions 3.1 through 3.4.

3.1 What is Australia's balance on goods?

3.2 What is Australia's balance on services?
3.3 What is Australia's balance on goods and services?
3.4 What is Australia's current account balance?

Assumptions (millions of US dollars) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Goods: exports 64,052 63,676 65,099 70,577 87,207 107,011 124,913 142,421 189,057 154,777 213,782 271,719 257,950 254,164
Goods: imports -68,865 -61,890 -70,530 -85,946 -105,238 -120,383 -134,509 -160,205 -193,972 -159,216 -196,303 -249,238 -270,136 -249,774
Balance on goods -4,813 1,786 -5,431 -15,369 -18,031 -13,372 -9,596 -17,784 -4,915 -4,439 17,479 22,481 -12,186 4,390

Services: credit 18,677 16,689 17,906 21,205 26,362 31,047 33,088 40,496 45,240 40,814 46,968 51,653 53,034 53,344
Services: debit -18,388 -16,948 -18,107 -21,638 -27,040 -30,505 -32,219 -39,908 -48,338 -42,165 -51,313 -61,897 -65,405 -67,399
Balance on services 289 -259 -201 -433 -678 542 869 588 -3,098 -1,351 -4,345 -10,244 -12,371 -14,055

Income: credit 8,984 8,063 8,194 9,457 13,969 16,445 21,748 32,655 37,320 27,402 35,711 47,852 47,168 45,910
Income: debit -19,516 -18,332 -19,884 -24,245 -35,057 -44,166 -54,131 -73,202 -76,719 -65,809 -84,646 -102,400 -88,255 -83,618
Balance on income -10,532 -10,269 -11,690 -14,788 -21,088 -27,722 -32,383 -40,547 -39,399 -38,407 -48,935 -54,548 -41,087 -37,708

Current transfers: credit 2,622 2,242 2,310 2,767 3,145 3,333 3,698 4,402 4,431 4,997 5,813 7,510 7,271 7,206
Current transfers: debit -2,669 -2,221 -2,373 -2,851 -3,414 -3,813 -4,092 -4,690 -4,805 -5,799 -7,189 -9,723 9,635 9,390
Balance on current transfers -47 21 -63 -84 -269 -480 -394 -288 -374 -802 -1,376 -2,213 16,906 16,596

Questions 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

3.1 What is Australia's balance on goods? -4,813 1,786 -5,431 -15,369 -18,031 -13,372 -9,596 -17,784 -4,915 -4,439 17,479 22,481 -12,186 4,390
(goods exports - goods imports)

3.2 What is Australia's balance on services? 289 -259 -201 -433 -678 542 869 588 -3,098 -1,351 -4,345 -10,244 -12,371 -14,055
(services credit - services debit)

3.3 What is Australia's balance on goods and service -4,524 1,527 -5,632 -15,802 -18,709 -12,830 -8,727 -17,196 -8,013 -5,790 13,134 12,237 -24,557 -9,665
(balance on goods + balance on services)

3.4 What is Australia's current account balance? -15,103 -8,721 -17,385 -30,674 -40,066 -41,032 -41,504 -58,031 -47,786 -44,999 -37,177 -44,524 -48,738 -30,777
(the sum of the four balances listed above,
goods, services, income, and current transfers)
India's Current Account

Use the following India balance of payments data from the IMF (all items are for the current account) to answer questions 3.5 through 3.9.

3.5 What is India's balance on goods?

3.6 What is India's balance on services?
3.7 What is India's balance on goods and services?
3.8 What is the balance on goods, services and income?
3.9 What is India's current account balance?

Assumptions (millions of US dollars) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Goods: exports 43,247 44,793 51,141 60,893 77,939 102,175 123,876 153,530 199,065 167,958 230,967 307,847 298,321 319,110
Goods: imports -53,887 -51,212 -54,702 -68,081 -95,539 -134,692 -166,572 -208,611 -291,740 -247,908 -324,320 -428,021 -450,249 -433,760
Balance on goods -10,640 -6,419 -3,561 -7,188 -17,600 -32,517 -42,696 -55,081 -92,675 -79,950 -93,353 -120,174 -151,928 -114,650

Services: credit 16,684 17,337 19,478 23,902 38,281 52,527 69,440 86,552 106,054 92,889 117,068 138,528 145,525 148,649
Services: debit -19,187 -20,099 -21,039 -24,878 -35,641 -47,287 -58,514 -70,175 -87,739 -80,349 -114,739 -125,041 -129,659 -126,256
Balance on services -2,503 -2,762 -1,561 -976 2,640 5,241 10,926 16,377 18,315 12,540 2,329 13,487 15,866 22,393

Income: credit 2,521 3,524 3,188 3,491 4,690 5,646 8,199 12,650 15,593 13,733 9,961 10,147 9,899 11,230
Income: debit -7,414 -7,666 -7,097 -8,386 -8,742 -12,296 -14,445 -19,166 -20,958 -21,272 -25,563 -26,191 -30,742 -33,013
Balance on income -4,893 -4,142 -3,909 -4,895 -4,052 -6,650 -6,245 -6,516 -5,365 -7,539 -15,602 -16,044 -20,843 -21,783

Current transfers: credit 13,548 15,140 16,789 22,401 20,615 24,512 30,015 38,885 52,065 50,526 54,380 62,735 68,611 69,441
Current transfers: debit -114 -407 -698 -570 -822 -869 -1,299 -1,742 -3,313 -1,764 -2,270 -2,523 -3,176 -4,626
Balance on current transfers 13,434 14,733 16,091 21,831 19,793 23,643 28,716 37,143 48,752 48,762 52,110 60,212 65,435 64,815

Questions 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

3.5 What is India's balance on goods? -10,640 -6,419 -3,561 -7,188 -17,600 -32,517 -42,696 -55,081 -92,675 -79,950 -93,353 -120,174 -151,928 -114,650

3.6 What is India's balance on services? -2,503 -2,762 -1,561 -976 2,640 5,241 10,926 16,377 18,315 12,540 2,329 13,487 15,866 22,393

3.7 What is India's balance on goods and -13,143 -9,181 -5,122 -8,164 -14,960 -27,276 -31,770 -38,704 -74,360 -67,410 -91,024 -106,687 -136,062 -92,257
services?

3.8 What is the balance on goods, services -18,036 -13,323 -9,031 -13,059 -19,012 -33,926 -38,015 -45,220 -79,725 -74,949 -106,626 -122,731 -156,905 -114,040
and income?

-4,601 1,410 7,060 8,772 780 -10,283 -9,299 -8,077 -30,973 -26,187 -54,516 -62,519 -91,470 -49,225
3.9 What is India's current account balance?
China's (Mainland) Balance of Payments

Use the following Chinese (Mainland) balance of payments data from the IMF to answer questions 3.10 through 3.13.

3.10 Is China experiencing a net capital inflow or outflow?

3.11 What is China's Total for Groups A and B?
3.12 What is China's Total for Groups A through C?
3.13 What is China's Total for Groups A through D?
3.14 Does China's BOP balance?

Assumptions (millions of US dollars) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

A. Current account balance 20,518 17,401 35,422 45,875 68,659 134,082 231,844 353,183 420,569 243,257 237,810 136,097 215,392 182,807
B. Capital account balance -35 -54 -50 -48 -69 4,102 4,020 3,099 3,051 3,938 4,630 5,446 4,272 3,052
C. Financial account balance 1,958 34,832 32,341 52,774 110,729 96,944 45,285 91,132 37,075 194,494 282,234 260,024 -36,038 323,151
D. Net errors and omissions -11,748 -4,732 7,504 17,985 10,531 15,847 3,502 13,237 18,859 -41,181 -53,016 -13,768 -87,071 -77,628
E. Reserves and related items -10,693 -47,447 -75,217 -116,586 -189,849 -250,975 -284,651 -460,651 -479,554 -400,508 -471,658 -387,799 -96,555 -431,382

Questions 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

3.10 Is China experiencing a net capital 1,923 34,778 32,291 52,726 110,660 101,046 49,305 94,231 40,126 198,432 286,864 265,470 -31,766 326,203
inflow or outflow? "inflow" "inflow" "inflow" "inflow" "inflow" "inflow" "inflow" "inflow" "inflow" "inflow" "inflow" "inflow" "inflow" "inflow"

3.11 What is China's Total for Groups A 20,483 17,347 35,372 45,827 68,590 138,184 235,864 356,282 423,620 247,195 242,440 141,543 219,664 185,859
and B?

3.12 What is China's Total for Groups A 22,441 52,179 67,713 98,601 179,319 235,128 281,149 447,414 460,695 441,689 524,674 401,567 183,626 509,010
through C?

3.13 What is China's Total for Groups A 10,693 47,447 75,217 116,586 189,849 250,975 284,651 460,651 479,554 400,508 471,658 387,799 96,555 431,382
through D?

3.14 Does China's BOP balance? 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Russia's Balance of Payments

Use the following Russian (Russian Federation) balance of payments data from the IMF to answer questions 3.14 through 3.17.

3.15 Is Russia experiencing a net capital inflow?

3.16 What is Russia's Total for Groups A and B?
3.17 What is Russia's Total for Groups A through C?
3.18 What is Russia's Total for Groups A through D?
3.19 Does Russia's BOP balance?

Assumptions (millions of US dollars) 2000 2001 2002 2003

A. Current account balance 46,839 33,935 29,116 35,410

B. Capital account balance 10,676 -9,378 -12,396 -993
C. Financial account balance -34,295 -3,732 921 3,024
D. Net errors and omissions -9,297 -9,558 -6,078 -9,179
E. Reserves and related items -13,923 -11,266 -11,563 -28,262

Questions 2000 2001 2002 2003

3.15 Is Russia experiencing a net capital inflow? -23,619 -13,110 -11,475 2,031
"outflow" "outflow" "outflow" "inflow"

3.16 What is Russia's Total for Groups A and B? 57,515 24,557 16,720 34,417

3.17 What is Russia's Total for Groups A through C? 23,221 20,824 17,641 37,441

3.18 What is Russia's Total for Groups A through D? 13,923 11,266 11,563 28,262

3.19 Does Russia's BOP balance? 0 0 0 0

Yes Yes Yes Yes
s 3.14 through 3.17.

2004 2005 2006 2007 2008 2009 2010 2011

59,512 84,602 92,316 72,193 103,935 50,384 67,452 97,274

-1,624 -12,764 291 -10,641 -104 -12,466 -41 130
-5,128 1,025 3,612 97,108 -139,705 -28,162 -21,526 -76,115
-5,870 -7,895 11,248 -9,732 -3,045 -6,392 -9,135 -8,651
-46,890 -64,968 -107,466 -148,928 38,919 -3,363 -36,750 -12,638

2004 2005 2006 2007 2008 2009 2010 2011

-6,752 -11,739 3,903 86,467 -139,809 -40,628 -21,567 -75,985

"outflow" "outflow" "inflow" "inflow" "outflow" "outflow" "outflow" "outflow"

57,888 71,838 92,607 61,552 103,831 37,918 67,411 97,404

52,760 72,863 96,219 158,660 -35,874 9,756 45,885 21,289

46,890 64,968 107,467 148,928 -38,919 3,364 36,750 12,638

0 0 1 0 0 1 0 0
Yes Yes Nearly Yes Yes Yes Yes Yes
 2012 2013

71,282 34,141
-5,218 -395
-25,675 -44,983
-10,370 -10,842
-30,020 22,078

2012 2013

-30,893 -45,378
"outflow" "outflow"

66,064 33,746

40,389 -11,237

30,019 -22,079

-1 -1
Nearly Nearly
Russia'a (Russian Federation's) Balance of Payments

Assumptions (million US$) 2000 2001 2002 2003 2004

A. Current account balance 46,839 33,935 29,116 35,410 59,512

B. Capital account balance 10,676 -9,378 -12,396 -993 -1,624
C. Financial account balance -34,295 -3,732 921 3,024 -5,128
D. Net errors and omissions -9,297 -9,558 -6,078 -9,179 -5,870
E. Reserves and related items -13,923 -11,266 -11,563 -28,262 -46,890
 2005 2006 2007 2008 2009 2010 2011 2012 2013

84,602 92,316 72,193 103,935 0 50,384 0 67,452 97,274 71,282 34,141

-12,764 291 -10,641 -104 0 -12,466 0 -41 130 -5,218 -395
1,025 3,612 97,108 -139,705 0 -28,162 0 -21,526 -76,115 -25,675 -44,983
-7,895 11,248 -9,732 -3,045 0 -6,392 0 -9,135 -8,651 -10,370 -10,842
-64,968 -107,466 -148,928 38,919 0 -3,363 0 -36,750 -12,638 -30,020 22,078
Euro Area Balance of Payments

Euro Area Balance of Payments. Use the following Euro Area balance of payments data from the IMF to answer questions 3.18 through 3.21.

3.20 Is the Euro Area experiencing a net capital inflow?

3.21 What is the Euro Area's Total for Groups A and B?
3.22 What is the Euro Area's Total for Groups A through C?
3.23 What is the Euro Area's Total for Groups A through D?
3.24 Does the Euro Area's BOP balance?

Assumptions (billions of US dollars) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

A. Current account balance -81.8 -19.7 44.5 24.9 81.2 19.2 -0.3 24.9 -195.9 -12.5 12.2 16.0 171.4 305.4
B. Capital account balance 8.4 5.6 10.3 14.3 20.5 14.2 11.7 5.4 14.2 11.2 7.3 14.0 7.3 27.9
C. Financial account balance 50.9 -41.2 -15.3 -47.6 -122.9 -71.4 -28.5 -3.4 175.3 73.8 -12.2 -103.2 -213.6 -345.2
D. Net errors and omissions 6.4 38.8 -36.5 -24.4 5.6 15.0 19.6 -21.3 11.2 # -12.6 -7.2 38.4 33.7 1.8
E. Reserves and related items 16.2 16.4 -3.0 32.8 15.6 23.0 -2.6 -5.7 -4.9 -59.7 -0.1 34.8 1.3 10.1

Questions 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

3.20 Is the Euro Area experiencing a net capital inflow? 59.3 -35.5 -5.0 -33.2 -102.4 -57.1 -16.7 2.1 189.6 84.9 -4.9 -89.2 -206.4 -317.2
"inflow" "outflow" "outflow" "outflow" "outflow" "outflow" "outflow" "inflow" "inflow" "inflow" "inflow" "inflow" "inflow" "inflow"

3.21 What is the Euro Area's Total for Groups A and B? -73.4 -14.1 54.9 39.2 101.7 33.4 11.4 30.3 -181.7 -1.4 19.5 30.0 178.7 333.3

3.22 What is the Euro Area's Total for Groups A through C? -22.6 -55.3 39.5 -8.3 -21.2 -38.0 -17.0 26.9 -6.4 72.4 7.3 -73.2 -35.0 -11.9

3.23 What is the Euro Area's Total for Groups A through D? -16.2 -16.4 3.0 -32.8 -15.6 -23.0 2.5 5.7 4.9 59.8 0.1 -34.8 -1.3 -10.1

3.24 Does the Euro Area's BOP balance? 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Problem 3.22 Trade Deficits and J-Curve Adjustment Paths

Assume that the United Arab Emirates has the following import/export volumes and
prices. It undertakes a major “devaluation” of the UAE Dirham (AED) by 6% on average
against all major trading partner currencies. What is the pre-devaluation and post-
devaluation trade balance?

Assumptions Values
Initial cross exchange rate, AED/€ 4.20
Price of exports, (AED) 100.0000
Price of imports, (€) 112.0000
Quantity of exports, units 300
Quantity of imports, units 200
Percentage devaluation of the AED 6.00%

a. What is the pre-devaluation trade balance?

Revenues from exports, AED AED 30,000
Expenditures on imports, € 22,400
Expenditures on imports, AED AED 94,080
Pre-devaluation trade balance -AED 64,080

b. Resulting trade balance immediately after devaluation?

Revenues from exports, AED AED 30,000
Expenditures on imports, € 22,400
New cross exchange rate, after devaluation 4.45
Expenditures on imports, AED AED 99,724.80
Post-devaluation trade balance (currency contract period) -AED 69,724.80