Category: LPsection

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Esto es un test de LP, y esta es la primera sección

The financial account is one of the components of the balance of payments. It shows the net acquisition and disposal of both financial assets and liabilities. As stated in the sixth edition of the Balance of Payments Manual (BPM), by the International Monetary Fund, “The financial account records transactions that involve financial assets and liabilities and that take place between residents and nonresidents”. The table below, taken from the BPM, shows an overview of the financial account. &nbsp...

Net capital outflows (NCOs, also called net foreign investment) make reference to the difference between the acquisition of foreign assets by domestic residents and the acquisition of domestic assets by non-residents. Therefore, it has to do with savings and investment (loanable funds) and foreign currency exchange. The relationship between net capital outflows and foreign currency exchange can be easily seen using a model, which analyses the market for loanable funds and the market for foreign ...

Net capital outflows (NCOs, also called net foreign investment) make reference to the difference between the acquisition of foreign assetsby domestic residents and the acquisition of domestic assets by non-residents. Net capital outflows takes two forms: foreign direct investment, and portfolio investment. Foreign direct investment implies actively managing the asset or the interest bought, while portfolio investment requires no role at all in management. An open economy can therefore buy and se...

The IS-LM-BP model (also known as IS-LM-BoP or Mundell-Fleming model) is an extension of the IS-LM model, which was formulated by the economists Robert Mundell and Marcus Fleming, who made almost simultaneously an analysis of open economies in the 60s. Basically we could say that the Mundell-Fleming model is a version of the IS-LM model for an open economy. In addition to the balance in goods and financial markets, the model incorporates an analysis of the balance of payments. Even though both e...

The IS-LM (Investment Savings-Liquidity preference Money supply) model focuses on the equilibrium of the market for goods and services, and the money market. It basically shows the relationship between real output and interest rates. It was developed by John R. Hicks, based on J. M. Keynes’ “General Theory”, in which he analysed four markets: goods, labour, credit and money. This model, firstly named IS-LL, appeared in his article “Mr. Keynes and the Classics: a Suggested Interpretation”, publis...

The capital account is one of the components of the balance of payments. It mainly reflects net foreign holdings of capital. When a country incurs on a deficit on current account, it needs to be financed by capital from abroad, it needs to have a capital account surplus. The opposite occurs in the case of current account surplus, there will be an outflow of capital to foreign countries. As stated in the sixth edition of the Balance of Payments Manual (BPM), by the International Monetary Fund, “t...

The current account is one of the components of the balance of payments. It mainly shows the value of movements in exports and imports and income derived form transactions related to net purchases of goods and services. As stated in the sixth edition of the Balance of Payments Manual (BPM), by the International Monetary Fund, “the current account shows flows of goods, services, primary income, and secondary income between residents and nonresidents”. Let’s review all these components:   “Th...

The balance of payments consists of a series of accounts that reflect the transactions made between an open economy and the rest of the world. As stated in the sixth edition of the Balance of Payments Manual, by the International Monetary Fund, “the balance of payments [is] a statement that summarizes economic transactions between residents and nonresidents during a specific time period”. These international accounts, which grow greater every day thanks to globalization, are harmonized with the ...