Lecture 3：Balance of Payments and Exchange Rates -- Cathy

The balance of payments accounts are including the different aspects of content.
● Meaning of the balance of payments.
● The current account (trade in goods and services).
● The capital account.
● The financial account.
─ Investment (direct and portfolio).
─ Other financial flows (mainly short term).
─ Financial lerivatives.
─ Flows to and from reserves (offical balance).
● Overall balance of payments.
● If the balance of payments always balance, why do we worry about it? The answer is that we only worry about the components of the balance of payment.
● The current account.
─ The story is tells about our economy. For example, the success of manufactures versus services.
─ The contribution it makes to aggregate demand. For example, export led growth.
● The capital or financial account.
─ Particularly increases.
─ Decreases in debt.
● The reserves of gold and foreign exchange.