4.1.7 - Balance of payments

• Causes of current account deficit:

  • Trade imbalance
  • income imbalance
  • low saving rates
• Causes of a current account surplus:

  • Trade surplus
  • high saving rates
  • FDI inflows
• Measures to reduce the imbalance in the current account:

  • Exchange rate adjustment
  • fiscal policy
  • trade policy
  • supply-side policy
  • subsidies