Current Account (Balance of Payments)

• Balanced trade


  Not having a massive surplus or deficit in trade
• Measuring trade performance

  1. Look at the balance of payments

  2. Balance of payments has 3 accounts: current account, capital account, financial account

  3. Focus on the current account
• Components of the current account

  • Trade in goods (exports and imports)
  • Trade in services (exports and imports)
  • Income
  • Transfers
• Trade balance


  Exports and imports of goods and services
• Income


  Flows of income entering or leaving the country (e.g. remittances)
• Transfers


  Government transfers like payments to the EU or foreign aid
• The current account measures the value, not the volume, of money flows
• If the overall current account figure is negative

  There is a current account deficit
• If the overall current account figure is positive

  There is a current account surplus