Trade Balance and Related Concepts - Definitions and Equations

What is the equation for Income Balance/Net Primary Income?

Net Investment Income + Net International Payment to Employees

What does the Trade Balance measure?

The difference between exports and imports of goods and services

What is the formula for calculating Trade Balance?

Trade Balance = Goods Balance + Services Balance

Bilateral Trade Deficit

Trade deficit between two economies

Global Imbalances

Disparities in trade balances worldwide

Income balance / Net Primary Income

Difference between incomes received and paid globally, recorded separately for capital and labour

How is income from labour recorded for the Income Balance/Net Primary Income?

Net International Payment to Employees:

• Records earnings of domestic citizens temporarily employed abroad

• Records compensation payments to foreigners temporarily working domestically

How is income from capital recorded for the Income Balance/Net Primary Income?

Net Investment Income

Net Unilateral Transfers

Gifts received or given to countries, including private gifts (remittances) and government transfers

What is the equation for Net Unilateral Transfers?

Private Remittances + Government Transfers

Current Account

Trade Balance + Income Balance, and Net Unilateral Transfers

Net International Investment Position

Difference between a country's foreign assets and liabilities

What is the equation for the Net International Investment Position?

Assets - Liabilities

What is the equation for the change in the Net International Investment Position?

Current Account + Valuation Changes

What is the equation for the Hypothetical Net International Investment Position?

Hypothetical NIIP(end) = NIIP(start) + CA... + CA(end)

What is the equation for True Net International Investment Position?

NII = rTNIPP

or

TNIPP = NII/r

What is the Dark Matter equation?

NII = (r^A)A - (r^L)L

What are a country's assets in the NIIP

Domestic owned foreign assets

What are a country's liabilities in the NIIP

Foreign owned domestic assets