Balance of payments

• There are 3 elements to balance of payments

  The current accounts

  The capital accounts

  The financial accounts
• Current accounts is the sum of the net balance of trade in goods and services as well as net primary and net secondary income .
• Primary income measures monetary flow from owning cross border financial assets, known as investment income .
• Secondary income is the transfer between residents and non residents e.g Migrant sending money back to their family abroad, foreign aid.
• Financial accounts include:

  Net balance of foreign direct investment

  Net balance of portfolio investment ( debt and equity)

  Balance of banking flows ( hot money )
• Capital accounts include transfer of assets without any exchange of economic value, such as debt forgiveness, inheritance