Balance of Payments Question. (1 Viewer)

[m0ofin]

Would someone mind showing me how to work out the Other Investments?

Do I ignore Net Income and the Current Account figures because the Other Investments is concerned with the C&F accounts?

I tried adding Port Inv + Reserve Assets + Other (?) + Direct + Net Errors to total the Capital Account but to no avail.

Thank you for any help.

 

[gnrlies]

Would someone mind showing me how to work out the Other Investments?

Do I ignore Net Income and the Current Account figures because the Other Investments is concerned with the C&F accounts?

I tried adding Port Inv + Reserve Assets + Other (?) + Direct + Net Errors to total the Capital Account but to no avail.

Thank you for any help.

30 (CAD) = 10 (capital acc) +

7 (portfolio inv) +
6 (direct inv) +
? (other investments) +
3 (reserv. assets) +

1 (net errors and omissions)


Adding each of those to equal 30, it is of course obvious that other investments is equal to 3. The trick with this question, is that theyve given you net incomes which features in the Current Account. But we are given the account balance anyway, so we do not need it.

As we know, the K+FA and the current account sum to zero which is the identity we have used. As we are given the capital account, we merely need to work out the financial account which is simply calculated by adding up the investments, plus the reserve assets.

The only other trick which isn't really a trick is net errors and omissions. You also need to include this on the K+FA side (hence it is added with the other items) as this is convention (as it is easier to measure the CAD - hence a mistake is more likely to be reflected in the K+FA side)

 

[m0ofin]

Oh wow, thanks Gnrlies, that was really helpful.