Federal Reserve Bank Of New York Essay

1620 Words Oct 26th, 2016 7 Pages
I. Introduction
According to Federal Reserve Bank of New York, “The Balance of Payment” (BOP) is a statement used by a country to summarize an economy’s transactions with the rest of the world by both private and public sectors for a specified time period, usually every quarter or year. It is known as “Balance of International Payment”, it involves all transactions between a country’s residents and its non-residents involving goods, services and income, financial claims on and liabilities to the rest of the word. If a country has received money, this is known as a “credit”, and if a country has paid or given money, the transaction is counted as a “debit”. Theoretically, the BOP should be zero, meaning that assets (credits) and liabilities (debits) should balance; however, in the reality, this is rarely the case.
The BOP is divided into 3 main categories: the current account, the capital account, and the financial account (Reem Heakle, 2015).
1. The Current Account The current account refers to the export and import of goods and services into a country. Within the current account are credits and debits on the trade of merchandise, including goods such as raw materials and manufactured goods that are bought, sold or given away in the form of aid. Services refer to receipts from tourism, transportation, engineering, business service fees such as lawyers or management consulting, and royalties from patents and copyrights, and income-generating assets such as stocks. Last but…
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