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balance of payments accounts
accounts for its payments to and its receipts from foreigners.
international transaction involves two parties, and each transaction enters the accounts twice:
once as a credit (+) and once as a debit (–).
balance of payments accounts are separated into two broad accounts
current and finanical account
current account
Accounts for flows of goods and services.
financial account
Accounts for net flows of financial assets (private sector + government).
When reportin- current account
Credits – Debits
When reporting - financial account
Debits - Credits
e financial account measures how
the net lending to or borrowing
China’s Fixed Exchange Rate in the 2000s
China fixed its currency low over the 2000s (despite the pressure to appreciate) to encourage exports to the United States
What the China did over its entry to WTO
Chinese government (did not purchase US goods but) purchased US financial assets (US T-bills) to create extra supplies for its currency to avoid appreciating its currency
