International University of Sarajevo

BALANCE OF PAYMENTS
CURRENT ACCOUNT COMPONENTS AND
ECONOMIC GROWTH

Title

Review on Articles

Course: International Financial Environment

Student: Amina Ibišević 170 201 033
 The Concept of Balance of Payments
(BoP)

BoP is the evaluation of all international economic transactions that might

arise among the inhabitants of one particular country and foreign
inhabitants.

BoP data influence and are influenced

by the crucial macroeconomic
variables including country’s GDP
(gross domestic product),
employment rate, price level,
exchange and interest rate.
 The Accounts of BoP

Current Capital Financial

Account Account Account
• Goods Trade • Transfer of • Direct Investment
• Services Trade financial assets • Portfolio
• Income and the Investment
acquisition and • Net Financial
• Current Transfers
disposal of Derivatives
nonproduced/non
• Other Asset
financial assets
Investment

In basic words, the current account is the difference between a state's savings and
its investment. It is a measurement of all international economic transactions that
include income or payment flows arising within the year.
Articles 1. Foreign Direct
Investment and
Economic Growth:
Literature Review
from 1994 to 2012
By: Almfraji, and
Almsafir

2. A causal
5. Tourism and relationship
Economic Growth: between foreign
An input output direct investment,
Analysis in Turkey economic growth,
By: Atan, and and export for
Arslanturk Slovakia
By: Szkorupova

3. Foreign Direct
Investments,
4. The Impact of
Exports, and
Remittances on
Economic Growth
Economic Growth
in Croatia: A Time
By: Meyer, and
Series Analysis
Shera
By: Dritsaki, and
Stiakakis
 1. Foreign Direct Investment and Economic Growth:
Literature Review from 1994 to 2012
By: Almfraji, and Almsafir
• FDI is considered to have a direct impact on economic
growth achieved through capital accumulation, and the
combination of new inputs and foreign technologies in the
production function of the host country.

• The observed period was from 1994-2012 in which the

effect of FDI inflow turned out to be significantly positive
in relation to the economic growth.
 2. A causal relationship between foreign direct investment,
economic growth, and export for Slovakia
By: Szkorupova

 Observed period: 2001-2010

 The co-integration method and vector error correction
model were applied on quarterly data
 Result: a positive relationship between foreign direct
investment and gross domestic product and between
export and gross domestic product
3. Foreign Direct Investments, Exports, and Economic Growth
in Croatia: A Time Series Analysis
By: Dritsaki, and Stiakakis

 Observed period: 1994-2012

 In 1993, Croatia has implemented the successful
stabilization program
 Problems: lack of contemporary technology, inrease in
total tax charges, increase in public expenditure, high trade
deficit
 Results:
 no positive impact of FDI on Croatian growth
 strong, short and long run, causal relationship between the
variables of growth and exports.
 4. The Impact of Remittances on Economic Growth
By: Meyer, and Shera

 A remittance is the funds an expatriate sends to his or her country of origin via wire,
mail, or online transfer.

Six high remittances receiving states: Albania, Bulgaria, Macedonia, Bosnia and
Herzegovina, Moldova, and Romania.

 Positive: remittances from migrants impact

positively on balance of payments in many
developing countries besides to fostering
the economic growth via their direct
implications for savings and investment in
human and physical capital and idirect
effects through consumption.

 Negative: remittances undermine

produtivity and growth in low income
countries because they are readily spent on
consumption likely to be dominated by
foreign goods than on productive
investments.
5. Tourism and Economic Growth: An input output Analysis in
Turkey
By: Atan, and Arslanturk
• In Turkey, tourism is growing very fast and its contribution to the
economy is very significant.

• The analysis shows that tourism sector has important and significant
impact on economy especially with hotel and restaurant indicator.
• It is thought that tourism sector will support the production in other
sectors, with a considerable impact on growth.
 CONCLUSION
 Specific components of Current Account: FDI, exports,
remittances, and tourism are positively related to the
growth of the economy.
 Only one article found out that the FDI did not have a
positive impact on economic growth of Croatia.
 References
1. A Causal Relationship between Foreign Direct Investment, Economic Growth and Export for Slovakia. (2014,
December 08). Retrieved April 20, 2018, from
https://www.sciencedirect.com/science/article/pii/S2212567114004584
2. Eiteman, David K, Arthur I Stonehill, and Michael H Moffett. Multinational Business Finance. 14th ed.Harlow: Pearson
Education Limited, 2016. Print
3. Foreign Direct Investment and Economic Growth Literature Review from 1994 to 2012. (2014, May 26). Retrieved
April 20, 2018, from https://www.sciencedirect.com/science/article/pii/S187704281402850X
4. Foreign Direct Investments, Exports, and Economic Growth in Croatia: A Time Series Analysis. (2014, November 06).
Retrieved April 20, 2018, from https://www.sciencedirect.com/science/article/pii/S2212567114007011
5. Heakal, R. (2018, January 18). Exploring the Current Account in the Balance of Payments. Retrieved April 20, 2018,
from https://www.investopedia.com/insights/exploring-current-account-in-balance-of-payments/
6. The impact of remittances on economic growth: An econometric model. (2016, July 14). Retrieved April 20, 2018, from
https://www.sciencedirect.com/science/article/pii/S1517758016300753
7. Tourism and Economic Growth Nexus: An Input Output Analysis in Turkey. (2012, December 17). Retrieved April 20,
2018, from https://www.sciencedirect.com/science/article/pii/S1877042812036038