Chapter 23 - International transactions and currency values. In this chapter, you will explore the functions and roles performed by the international markets within the global financial system, you will see how international payments for goods and services are made and how international borrowing and lending can be tracked through a nation’s balance-of-payments accounts, you will come to understand how the values of national currencies (such as the dollar and the euro) are determined within the modern financial system. | Chapter 23 International Transactions And Currency Values Learning Objectives To explore the functions and roles performed by the international markets within the global financial system. To see how international payments for goods and services are made, and how international borrowing and lending can be tracked through a nation’s balance-of-payments accounts. To understand how the values of national currencies are determined. Introduction Facilitated by dramatic improvements in communication and transportation, world trade and the international financial markets have experienced enormous growth. The Balance of Payments Accounts One of the most widely used sources of information concerning flows of funds, goods, and services between nations is each country’s balance of payments (BOP) accounts. This statistical report summarizes all the economic and financial transactions between residents of one nation and the rest of the world during a specified period of time. The . Balance . | Chapter 23 International Transactions And Currency Values Learning Objectives To explore the functions and roles performed by the international markets within the global financial system. To see how international payments for goods and services are made, and how international borrowing and lending can be tracked through a nation’s balance-of-payments accounts. To understand how the values of national currencies are determined. Introduction Facilitated by dramatic improvements in communication and transportation, world trade and the international financial markets have experienced enormous growth. The Balance of Payments Accounts One of the most widely used sources of information concerning flows of funds, goods, and services between nations is each country’s balance of payments (BOP) accounts. This statistical report summarizes all the economic and financial transactions between residents of one nation and the rest of the world during a specified period of time. The . Balance of International Payments The transactions recorded in the balance of payments fall into three broad groups: Transactions on current account, . imports and exports of goods and services, unilateral transfers (gifts) Transactions on capital account, and short-term investment at home and abroad Official reserve transactions to settle BOP deficits The . Balance of International Payments Principal Credit and Debit Items Recorded in a Nation’s Balance of Payments The . Balance of International Payments . international transactions are subdivided into categories – the current account, the capital account, and residual items (including a sizeable statistical discrepancy due to unreported transactions) – that help us to understand how the BOP bookkeeping system works. The . Balance of International Payments The Current Account The most important components of the current account include: The merchandise trade balance The service balance Net investment income .
