Methods To Correct

Disequilibrium In BOP
BY- A. JANAKI RAM
171FK01017
BBA-3(A)
Meaning of disequilibrium:
• Disequilibrium  means Imbalance.

• Disequilibrium of Deficit arises when our

receipts from the foreigners fall bellow our
payments to foreigners.
• It arises when the effective demand for
foreign exchange of the country exceeds its
supply at a given rate of exchange.
• This is called as “Unfavourable balance”.
 Disequilibrium of surplus arises when receipts of
the country exceed its payments.

 Such a situation arises when the effective demand

for foreign exchange is less than its supply.

 Such a surplus disequilibrium is termed as

“Favourable balance”
Methods To Correct Disequilibrium
In BOP

1.Automatic measure
2.Deliberate measure
i. Monetary measure
ii. Trade measure
iii. Miscellaneous measures
1.Automatic measure
• In this measure disequilibrium BOP may automatically
disappear by certain force come into operation in country
• For example:- Gold
• If BOP was unfavorable by outflow of gold from country it
causes reduction in price level
• It will automatically restore while inflow of gold
2.Deliberate measure
1.Monetary measure: It is further classified in to 3
i. Reduction of money supply: Through CRR,SLR, OPEN
MARKETS

ii. Devaluation: Reduction in official rate at one currency

is exchange to another.

iii. Exchange control: Restriction on foreign exchange by

central bank
2. Trade measures:
3. Miscellaneous measures:
This include developing import substituting
industries, postponing debt payments, check on
inflation.