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International Business, 8th Edition by Michael H. Moffett, Iikka A. Ronkainen, Michael Czinkota

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CHAPTER 4

The Balance of Payments

CHAPTER CONTENTS & LEARNING OBJECTIVES

FUNDAMENTALS OF BALANCE OF PAYMENTS ACCOUNTING

1. To understand the fundamental principles of how countries measure international business activity, the balance of payments

THE ACCOUNTS OF THE BALANCE OF PAYMENTS

2. To examine the similarities of the current and capital accounts of the balance of payments

THE BALANCE OF PAYMENTS IN TOTAL

3. To understand the critical differences between trade in merchandise and services, and why international investment activity has recently been controversial in the United States

THE BALANCE OF PAYMENTS AND ECONOMIC CRISES

4. To review the mechanical steps of how exchange rate changes are transmitted into altered trade prices and eventually trade volumes

CAPITAL MOBILITY

5. To understand how countries with different government policies toward international trade and investment, or different levels of economic development, differ in their balance of payments

Why Do Balance of Payments Problems Occur?

Balance of payments difficulties can arise—and, in the worst case, build into crises—even in the face of strong prevention efforts. The IMF assists countries in restoring economic stability by helping devise programs of corrective policies and providing loans to support them.

Bad luck, inappropriate policies, or a combination of the two may create balance of payments difficulties in a country—that is, a situation where sufficient financing on affordable terms cannot be obtained ...

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