Balance of payments
The record of a country's transactions with the rest of the world, chiefly in the current and financial accounts. It balances by construction, so a current account deficit is always matched by borrowing or asset sales abroad.
Where you will meet it
Balance of payments appears in 2 learning outcomes on the CFA syllabus. A few of them:
- Explain geopolitics and globalisation and what the IMF, WTO and World Bank each do
“The IMF oversees the international monetary system, monitors members' economies and lends to countries with balance of payments difficulties, usually with policy conditions.”
- Explain how the flows recorded in the balance of payments move exchange rates
“Every balance of payments flow creates demand for, or supply of, a currency, and a current account deficit is matched, apart from statistical discrepancy, by a surplus on the capital and financial accounts, that is, by net inflows.”
See also
Practise it
Practise balance of payments until it is automatic: questions that explain every wrong option.
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