Relating the Balance of Payments to Open-economy Macro Categories
 

BoP categories 

Simplified BoP for macro diagrams

 

Current Account

 

 

Exports

source of foreign exchange (+)

Exports (X)
 

Trade Balance

(X - M)

Imports

use of foreign exchange (-)

Imports (M)
 

Private Transfers

(ignored)

 

Official Transfers

(ignored)

 

Income

(ignored)

 

Financial Account

 

 

Foreign Direct Investment (foreigners’ new purchase of ownership stakes in our country, or our sale of previously-acquired stakes in foreign enterprises)
source of foreign exchange (+)

Gross Foreign Saving 
(GFS)

(sources of foreign exchange)

Net Foreign Saving

(GFS - GFI)
 

Portfolio Investment

(foreigners’ new purchase of financial securities in our country, or our sale of previously-acquired foreign financial securities)
source of foreign exchange (+)

Other investment

(including foreigners’ new loans to us, or their repayments of (principal on) old loans from us.)
source of foreign exchange (+)

Foreign Direct Investment (our new purchase of ownership stakes abroad, or foreigners’ sale to us of previously-acquired stakes in our enterprises)
use of foreign exchange (-)

Gross Foreign Investment 
(GFI)

(uses of foreign exchange)

Portfolio Investment by (our new purchase of financial securities abroad, or foreigners’ sale of previously-acquired domestic financial securities to us)
use of foreign exchange (-)

Other investment

(including our new loans to foreigners, or our repayments of (principal on) old loans from foreigners.)
use of foreign exchange (-)

Changes in Reserves

(ignored)

 

Errors and Omissions

(ignored)

 

  


1998, 2006 Colin Danby.