Causes of Balance of Payment Problems in Emerging and Developing Economies
INTRODUCTION:
The balance of payment has been an important indicator of the growing economic activities in all countries. The purpose of this essay is to discuss factors that causes Balance of payment problems that are encountered by developing and emerging economies. This essay starts off with an introduction of the definition of B.O.P and the overview of its components. This is followed by an insight into the approaches used to explain deficits from the current account of the B.O.P. Furthermore, the causes of the problems were discussed.
MAIN TEXT:
The balance of payment has been an important indicator of the growing activities in all countries of the world. It shows the extent to which a country is developed technically and also competitive in the world market. Balance of payment can thus be defined as a statistical record which shows all the economic transactions which occurs between residents of a country and the rest of the world. The transaction between residents and non residents consists of goods, services and income; those involving financial claims on, and liabilities to the rest of the world.
Since the balance of payment deals with transactions and thus deals with flows rather than stocks. Which means it is concerned with the economic events that take place during a specified period of time and not the outstanding totals of economic assets and liabilities that exist at particular periods in time.
Its main purpose is to inform the government about the international economic position of the country and also in helping it make decisions about monetary and fiscal issues, on one hand, and also about its trade and payments on the other hand.
SRUCTURAL OVERVIEW OF THE STANDARD COMPONENTS
The standard components are grouped under two major heading: the current account and the capital and financial account. The current account is further subdivided into three broad categories: goods and services (which is subdivided into goods and services), income and
The balance of payment has been an important indicator of the growing economic activities in all countries. The purpose of this essay is to discuss factors that causes Balance of payment problems that are encountered by developing and emerging economies. This essay starts off with an introduction of the definition of B.O.P and the overview of its components. This is followed by an insight into the approaches used to explain deficits from the current account of the B.O.P. Furthermore, the causes of the problems were discussed.
MAIN TEXT:
The balance of payment has been an important indicator of the growing activities in all countries of the world. It shows the extent to which a country is developed technically and also competitive in the world market. Balance of payment can thus be defined as a statistical record which shows all the economic transactions which occurs between residents of a country and the rest of the world. The transaction between residents and non residents consists of goods, services and income; those involving financial claims on, and liabilities to the rest of the world.
Since the balance of payment deals with transactions and thus deals with flows rather than stocks. Which means it is concerned with the economic events that take place during a specified period of time and not the outstanding totals of economic assets and liabilities that exist at particular periods in time.
Its main purpose is to inform the government about the international economic position of the country and also in helping it make decisions about monetary and fiscal issues, on one hand, and also about its trade and payments on the other hand.
SRUCTURAL OVERVIEW OF THE STANDARD COMPONENTS
The standard components are grouped under two major heading: the current account and the capital and financial account. The current account is further subdivided into three broad categories: goods and services (which is subdivided into goods and services), income and
References: Al Hanom, E. A ‘’Towards a Development oriented Approach to the B.O.P in LDC’s’’. Arab Economic Journal. No 53-54, 2011. Pp 4-12 -----------------------