Macedonia's Balance of Payments

Macedonia. Use the following Macedonia balance of payments data to answer questions 1 through 4. Note that the data presented in the text is insufficient to answer the question
asked.

Assumptions (millions of US dollars) 1998 1999 2000 2001 2002 2003 2004 2005

Goods: exports 1,291.5 1,190.0 1,320.7 1,155.4 1,112.1 1,362.7 1,672.4 2,039.6
Goods: imports 1,806.6 1,685.8 2,011.1 1,681.8 1,916.5 2,210.6 2,784.5 3,097.1
Balance on goods -515.1 -495.8 -690.4 -526.4 -804.4 -847.9 -1,112.1 -1,057.5

Services: credit 149.3 272.8 316.7 244.6 253.0 326.9 407.9 471.6
Services: debit 209.1 230.9 268.0 263.8 275.3 337.0 462.3 505.3
Balance on services -59.8 41.9 48.7 -19.2 -22.3 -10.1 -54.4 -33.7

Income: credit 23.6 24.2 41.6 52.6 51.0 60.4 84.6 97.6
Income: debit 68.5 66.5 87.3 93.3 80.8 91.9 123.8 152.7
Balance on income -45.0 -42.3 -45.7 -40.7 -29.8 -31.5 -39.2 -55.1

Current transfers: credit 542.7 618.5 788.2 725.7 535.7 778.9 836.9 1,109.5
Current transfers: debit 192.5 154.8 173.3 383.0 37.2 38.2 46.0 44.7
Balance on current transfers 350.2 463.7 614.9 342.7 498.5 740.7 790.9 1,064.8

A. Current account balance -269.7 -32.5 -72.5 -243.6 -358.0 -148.8 -414.8 -81.5
B. Capital account balance -1.8 0.0 0.3 1.3 8.3 -6.7 -4.6 -2.0
C. Financial account balance 329.9 14.2 290.3 325.7 257.2 237.0 439.7 506.8
D. Net errors and omissions -15.1 159.9 61.0 2.3 -29.7 -26.0 7.7 -12.9
E. Reserves and related items -43.3 -141.7 -279.2 -85.6 122.1 -55.4 -28.0 -41.6

Questions 1998 1999 2000 2001 2002 2003 2004 2005

4.1 What is Macedonia's balance on goods? -515.1 -495.8 -690.4 -526.4 -804.4 -847.9 -1,112.1 -1,057.5
(goods exports - goods imports)

4.2 What is Macedonia's balance on services? -59.8 41.9 48.7 -19.2 -22.3 -10.1 -54.4 -33.7
(services credit - services debit)

4.3 What is Macedonia's balance on goods and services? -574.9 -453.9 -641.7 -545.6 -826.7 -858.0 -1,166.5 -1,091.2
(balance on goods + balance on services

4.4 What is Macedonia's current account balance? -269.7 -32.5 -72.5 -243.6 -358.0 -148.8 -414.8 -81.5
(the sum of the four balances listed above
goods, services, income, and current transfers

Additional Questions

A. Is Macedonia experiencing a net capital inflow or outflow? 328.1 14.2 290.6 327.0 265.5 230.3 435.1 504.8
"inflow" "inflow" "inflow" "inflow" "inflow" "inflow" "inflow" "inflow"

B. What is Macedonia's Total for Groups A and B? -271.5 -32.5 -72.2 -242.3 -349.7 -155.5 -419.4 -83.5

C. What is Macedonia's Total for Groups A through C? 58.4 -18.3 218.1 83.4 -92.5 81.5 20.3 423.3

D. What is Macedonia's Total for Groups A through D? 43.3 141.6 279.1 85.7 -122.2 55.5 28.0 410.4
Australia's Current Account

Australia’s Current Account. Use the following data from the International Monetary Fund to answer questions 5 through 8.

Assumptions (millions of US dollars) 1998 1999 2000 2001 2002 2003 2004 2005

Goods: exports 55,884 56,096 64,052 63,676 65,099 70,577 87,207 106,969
Goods: imports 61,215 65,857 68,865 61,890 70,530 85,946 105,238 120,372
Balance on goods -5,331 -9,761 -4,813 1,786 -5,431 -15,369 -18,031 -13,403

Services: credit 16,181 17,399 18,677 16,689 17,906 21,205 26,362 28,442
Services: debit 17,272 18,330 18,388 16,948 18,107 21,638 27,040 29,360
Balance on services -1,091 -931 289 -259 -201 -433 -678 -918

Income: credit 6,532 7,394 8,984 8,063 8,194 9,457 13,969 16,969
Income: debit 17,842 18,968 19,516 18,332 19,884 24,245 35,057 43,746
Balance on income -11,310 -11,574 -10,532 -10,269 -11,690 -14,788 -21,088 -26,777

Current transfers: credit 2,651 3,003 2,622 2,242 2,310 2,767 3,145 3,262
Current transfers: debit 2,933 3,032 2,669 2,221 2,373 2,851 3,414 3,625
Balance on current transfers -282 -29 -47 21 -63 -84 -269 -363

Questions 1998 1999 2000 2001 2002 2003 2004 2005

4.5 What is Australia's balance on goods? -5,331 -9,761 -4,813 1,786 -5,431 -15,369 -18,031 -13,403
(goods exports - goods imports)

4.6 What is Australia's balance on services? -1,091 -931 289 -259 -201 -433 -678 -918
(services credit - services debit)

4.7 What is Australia's balance on goods and services? -6,422 -10,692 -4,524 1,527 -5,632 -15,802 -18,709 -14,321
(balance on goods + balance on services)

4.8 What is Australia's current account balance? -18,014 -22,295 -15,103 -8,721 -17,385 -30,674 -40,066 -41,461
(the sum of the four balances listed above,
goods, services, income, and current transfers)
People's Republic of China (Mainland) Balance of Payments

China’s (Mainland) Balance of Payments. Use the following Chinese balance of payments data from the IMF to answer questions 9 through 12. Note that the data presented in the text is
insufficient to fully answer the questions asked.

Assumptions (millions of US dollars) 1998 1999 2000 2001 2002 2003 2004 2005

Goods: exports 183,529 194,716 249,131 266,075 325,651 438,270 593,393 762,484
Goods: imports 136,915 158,734 214,657 232,058 281,484 393,618 534,410 628,295
Balance on goods 46,614 35,982 34,474 34,017 44,167 44,652 58,983 134,189

Services: credit 23,895 26,248 30,430 33,334 39,745 46,734 62,434 74,404
Services: debit 26,672 31,589 36,031 39,267 46,528 55,306 72,133 83,795
Balance on services -2,777 -5,341 -5,601 -5,933 -6,783 -8,572 -9,699 -9,391

Income: credit 5,584 8,330 12,550 9,388 8,344 16,095 20,544 38,959
Income: debit 22,228 22,800 27,216 28,563 23,289 23,933 24,067 28,324
Balance on income -16,644 -14,470 -14,666 -19,175 -14,945 -7,838 -3,523 10,635

Current transfers: credit 4,661 5,368 6,861 9,125 13,795 18,482 24,326 27,735
Current transfers: debit 382 424 550 633 811 848 1,428 2,349
Balance on current transfers 4,279 4,944 6,311 8,492 12,984 17,634 22,898 25,386

A. Current account balance 31,472 21,115 20,518 17,401 35,423 45,876 68,659 160,819
B. Capital account balance -47 -26 -35 -54 -50 -48 -69 4,102
C. Financial account balance -6,275 5,204 1,958 34,832 32,341 52,774 110,729 58,862
D. Net errors and omissions -18,902 -17,641 -11,748 -4,732 7,504 17,985 26,834 -16,441
E. Reserves and related items -6,248 -8,652 -10,693 -47,447 -75,217 -116,586 -206,153 -207,342

Questions 1998 1999 2000 2001 2002 2003 2004 2005

4.9 What is China's balance on goods? 46,614.0 35,982.0 34,474.0 34,017.0 44,167.0 44,652.0 58,983.0 134,189.0
(goods exports - goods imports)

4.10 What is China's balance on services? -2,777.0 -5,341.0 -5,601.0 -5,933.0 -6,783.0 -8,572.0 -9,699.0 -9,391.0
(services credit - services debit)

4.11 What is China's balance on goods and services? 43,837.0 30,641.0 28,873.0 28,084.0 37,384.0 36,080.0 49,284.0 124,798.0
(balance on goods + balance on services)

4.12 What is China's current account balance? 31,472.0 21,115.0 20,518.0 17,401.0 35,423.0 45,876.0 68,659.0 160,819.0
(the sum of the four balances listed above,
goods, services, income, and current transfers)

Additional Questions

A. Is China experiencing a net capital inflow or outflow? -6,322 5,178 1,923 34,778 32,291 52,726 110,660 62,964
"outflow" "inflow" "inflow" "inflow" "inflow" "inflow" "inflow" "inflow"

B. What is China's Total for Groups A and B? 31,425 21,089 20,483 17,347 35,373 45,828 68,590 164,921

C. What is China's Total for Groups A through C? 25,150 26,293 22,441 52,179 67,714 98,602 179,319 223,783

D. What is China's Total for Groups A through D? 6,248 8,652 10,693 47,447 75,218 116,587 206,153 207,342
Uruguay's Current Account

Use the following Uruguay balance of payments data from the IMF (all items are for the current account) to answer questions 13 through 17.

Assumptions (millions of US dollars) 1998 1999 2000 2001 2002 2003 2004 2005

Goods: exports 2,829.3 2,290.6 2,383.8 2,139.4 1,922.1 2,281.1 3,145.0 3,758.0
Goods: imports 3,601.4 3,187.2 3,311.1 2,914.7 1,873.8 2,097.8 2,992.2 3,729.9
Balance on goods -772.1 -896.6 -927.3 -775.3 48.3 183.3 152.8 28.1

Services: credit 1,319.1 1,261.6 1,275.7 1,122.5 753.7 802.8 1,150.8 1,329.4
Services: debit 883.6 802.3 881.8 801.4 600.3 635.8 786.1 895.9
Balance on services 435.5 459.3 393.9 321.1 153.4 167.0 364.7 433.5

Income: credit 608.0 735.5 781.5 832.0 453.4 241.7 372.6 567.0
Income: debit 805.9 879.3 841.8 895.2 405.1 730.1 960.4 1,152.3
Balance on income -197.9 -143.8 -60.3 -63.2 48.3 -488.4 -587.8 -585.3

Current transfers: credit 75.0 78.4 48.0 48.0 83.7 94.9 127.2 138.5
Current transfers: debit 16.0 4.9 20.5 18.3 11.5 12.3 14.3 17.2
Balance on current transfers 59.0 73.5 27.5 29.7 72.2 82.6 112.9 121.3

Questions 1998 1999 2000 2001 2002 2003 2004 2005

4.13 What is Uruguay's balance on goods? -772.1 -896.6 -927.3 -775.3 48.3 183.3 152.8 28.1

4.14 What is Uruguay's balance on services? 435.5 459.3 393.9 321.1 153.4 167.0 364.7 433.5

4.15 What is Uruguay's balance on goods and services? -336.6 -437.3 -533.4 -454.2 201.7 350.3 517.5 461.6

4.16 What is the balance on goods, services and income? -534.5 -581.1 -593.7 -517.4 250.0 -138.1 -70.3 -123.7

4.17 What is Uruguay's current account balance? -475.5 -507.6 -566.2 -487.7 322.2 -55.5 42.6 -2.4
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 18 through 21. Note that the data presented in the text is insufficient to
fully answer the questions posed.

Assumptions (billions of US dollars) 1998 1999 2000 2001 2002 2003 2004 2005

Goods: exports 878.1 852.7 895.6 918.5 996.0 1,170.1 1,404.9 1,521.5
Goods: imports 756.1 794.6 890.0 853.9 874.8 1,051.4 1,279.5 1,464.4
Balance on goods 122.0 58.1 5.6 64.6 121.2 118.7 125.4 57.2

Services: credit 258.9 269.0 272.2 287.3 316.7 378.3 455.1 498.8
Services: debit 265.6 279.2 281.4 290.2 299.4 352.7 414.8 455.9
Balance on services -6.6 -10.2 -9.2 -2.9 17.3 25.7 40.3 42.9

Income: credit 222.7 226.5 257.9 244.0 232.0 274.4 359.4 439.8
Income: debit 253.6 264.5 300.3 279.9 269.6 318.0 375.3 453.6
Balance on income -30.9 -38.0 -42.4 -35.8 -37.6 -43.6 -15.9 -13.8

Current transfers: credit 70.1 73.4 65.7 71.2 81.1 93.2 102.4 106.9
Current transfers: debit 123.1 118.2 111.7 116.9 127.1 157.0 174.8 194.6
Balance on current transfers -53.1 -44.8 -46.1 -45.7 -46.0 -63.8 -72.4 -87.7

A. Current account balance 31.3 -34.9 -92.0 -19.9 55.0 37.0 77.4 -1.4
B. Capital account balance 13.9 13.6 8.4 5.6 9.6 15.0 21.8 15.4
C. Financial account balance -86.1 2.4 14.0 -41.5 -15.3 -33.4 -29.8 77.8
D. Net errors and omissions 31.2 -2.2 43.0 38.6 -42.5 -51.9 -70.4 -89.0
E. Reserves and related items 9.6 11.6 16.2 16.5 -2.9 33.3 15.6 23.9

Questions 1998 1999 2000 2001 2002 2003 2004 2005

4.18 What is the Euro Area's balance on goods? 122.0 58.1 5.6 64.6 121.2 118.7 125.4 57.2
(goods exports - goods imports)

4.19 What is the Euro Area's balance on services? -6.6 -10.2 -9.2 -2.9 17.3 25.7 40.3 42.9
(services credit - services debit)

4.20 What is the Euro Area's balance on goods and services? 115.3 47.9 -3.6 61.7 138.5 144.4 165.7 100.1
(balance on goods + balance on services)

4.21 What is the Euro Area's current account balance? 31.3 -34.9 -92.0 -19.9 55.0 37.0 77.4 -1.4
(the sum of the four balances listed above,
goods, services, income, and current transfers)

Additional Questions

A. Is the Euro Area experiencing a net capital inflow? -72.1 16.0 22.4 -35.8 -5.7 -18.4 -8.0 93.2
"outflow" "inflow" "inflow" "outflow" "outflow" "outflow" "outflow" "intflow"

B. What is the Euro Area's Total for Groups A and B? 45.3 -21.4 -83.6 -14.3 64.6 52.0 99.2 14.0

C. What is the Euro Area's Total for Groups A through C? -40.8 -19.0 -69.6 -55.7 49.3 18.6 69.4 91.8

D. What is the Euro Area's Total for Groups A through D? -9.6 -21.2 -26.6 -17.1 6.8 -33.3 -1.0 2.8
Argentina's Balance of Payments

Argentina’s Balance of Payments. Argentina used a currency board to maintain its peso on a par with the U.S. dollar. However, in January 2002 the peso collapsed. Argentina’s BOP could have
signaled this event. Listed below is Argentina’s BOP for the period 1998-2005. Use this data to answer questions 22 through 28.

Assumptions (millions of US dollars) 1998 1999 2000 2001 2002 2003 2004 2005

A. Current Account
Goods: exports 26,434 23,309 26,341 26,543 25,651 29,939 34,576 40,106
Goods: imports 29,531 24,103 23,889 19,158 8,473 13,134 21,311 27,302
Balance on goods -3,097 -794 2,452 7,385 17,178 16,805 13,265 12,804

Services: credit 4,854 4,719 4,936 4,627 3,442 4,409 5,103 6,098
Services: debit 9,298 8,830 9,219 8,490 4,973 5,715 6,619 7,601
Balance on services -4,444 -4,111 -4,283 -3,863 -1,531 -1,306 -1,516 -1,503

Income: credit 6,134 6,075 7,420 5,358 3,022 3,086 3,467 4,099
Income: debit 13,538 13,565 14,968 13,085 10,059 11,057 12,392 10,308
Balance on income -7,404 -7,490 -7,548 -7,727 -7,037 -7,971 -8,925 -6,209

Current transfers: credit 802 790 792 856 819 943 1,113 1,235
Current transfers: debit 338 337 393 431 268 420 511 622
Balance on current transfers 464 453 399 425 551 523 602 613

Current Account Balance (Group A) -14,481 -11,942 -8,980 -3,780 9,161 8,051 3,426 5,705

B. Capital Account (Group B) 73 149 106 157 406 70 43 91

C. Financial Account
Direct investment abroad 2,325 1,730 901 161 -627 -774 -442 -1,151
Direct investment in Argentina 7,291 23,988 10,418 2,166 2,149 1,652 4,274 4,730
Direct investment in Argentina, net 4,966 22,258 9,517 2,005 2,776 2,426 4,716 5,881

Portfolio investment assets, net -1,906 -2,005 -1,252 212 477 -95 -77 1,368
Portfolio investment liabilities, net 10,693 -4,780 -1,331 -9,715 -5,117 -7,663 -9,339 -1,922
Balance on other investment assets and liabilities, net 5,356 1,838 2,287 -5,566 -9,925 -4,581 -2,636 -3,501

D. Net Errors and Omissions -437 -642 -154 -2,810 -1,832 -1,337 110 328
E. Reserves and Related Items -4,090 -2,013 1,176 21,405 13,402 9,077 6,993 -7,594

Questions

4.22 What is Argentina's balance on goods and services? -7,541 -4,905 -1,831 3,522 15,647 15,499 11,749 11,301
4.23 What is Argentina's current account balance? -14,481 -11,942 -8,980 -3,780 9,161 8,051 3,426 5,705
4.24 What seems to have been the primary driver in
Argentina's current account balance? income debit income debit income debit income debit income credit income credit income credit income credit
4.25 What is Argentina's financial account balance? 19,109 17,311 9,221 -13,064 -11,789 -9,913 -7,336 1,826
4.26 What is Argentina's Total for Groups A through C? 4,701 5,518 347 -16,687 -2,222 -1,792 -3,867 7,622
4.27 What is Argentina's Total for Groups A through D? 4,264 4,876 193 -19,497 -4,054 -3,129 -3,757 7,950
4.28 Unless the financial account could grow a very large
surplus, a crisis will ensue.
Problem 4.29 Trade Deficits and J-Curve Adjustment Paths

Assume the United States has the following import/export volumes and prices. It
undertakes a major "devaluation" of the dollar, say 18% on average against all major
trading partner' currencies. What is the pre-devaluation and post-devaluation trade
balance?

Assumptions Values
Initial spot exchange rate, $/fc 2.00
Price of exports, dollars ($) 20.0000
Price of imports, foreign currency (fc) 12.0000
Quantity of exports, units 100
Quantity of imports, units 120
Percentage devaluation of the dollar 18.00%
Price elasticity of demand, imports (0.900)

a. What is the pre-devaluation trade balance?

Revenues from exports, $ $2,000
Expenditures on imports, fc 1,440
Expenditures on imports, $ $2,880
Pre-devaluation trade balance ($880)

b. Resulting trade balance immediately after devaluation?

Revenues from exports, $ $2,000
Expenditures on imports, fc 1,440
New spot exchange rate, after devaluation 2.36
Expenditures on imports, $ $3,398
Post-devaluation trade balance (currency contract period) ($1,398)