5. Balance of Payment

• Balance of Payment

  Statement summarizing the economic transactions between the residents of a country and non-residents during specific period, usually a year
• Includes in Balance of Payment

  • Transactions in goods
  • Transactions in services
  • Income
  • Transfers
  • Financial assets and liabilities
• Accounts in Balance of Payment

  • Current account
  • Financial account
  • Capital account
• Current account

  Covers the exports and imports of good and services, payment of income, and current transfers between residents of a country and non-residents
• Financial account

  Records transactions that involve financial assets and liabilities that take place between residents and non-residents (all international purchases or sales of financial assets)
• Financial assets

  • Equity and investment fund shares
  • Debt instruments
  • Financial derivatives
  • Employee stock options
  • Monetary gold
• Asset

  Any one of the form in which wealth can be held, such as money, stocks, factories, government debt
• Capital account

  Shows credit and debit entries for non-produced non-finacial assets and capital transfers between residents and non-residents (non-financial non-produced assets, e.g. natural resources, leases and licenses, goodwill)
• Personal remittances

  • Personal transfers
  • Compensation of employees
• Personal transfers

  All current transfers in cash or in kind between resident (person who comes to the foreign country for more than 1 year) and non-resident (less than 1 year), independent of the source of income of the sender
• Compensation of Employees


  • Wages and salaries in cash
  • Wages and salaries in kind
  • Employers' social contribution
• Gravity Model of Migration

  Newton's law of gravitation
• As the population of the state increases, both for origins and destinations

  The interaction between them increases
• Distance

  Negatively or inversely relational to interaction (interaction decreases as distance decreases)
• Natural resources

  • Supply electricity
  • Supply mobility
  • Supply housing
  • Supply infrastructure
• Natural resources

  • Key assets driving development and wealth creation
  • Can be renewable or non renewable
• Renewable resources

  Can be replaced and reused (wind, solar, water, wood)
• Non-renewable resources

  Exist a fixed amount, are exhaustible, and can only be replaced by processes that take millions of years (Fossil fuels, diamonds, gems, minerals, metals, ores)
• Dutch Disease

  situation where good news for one sector of the economy, such as the discovery of natural resources, results in a negative impact on the country's overall economy.
• Sectors of economy experiencing export boom

  • Tradables (Natural resource sector, Non-resource traded goods sector)
  • Non-tradables (Sector supplying domestic residents retail trade, service industry and construction)