Describe the balance of payments identity, Financial Management

Assignment Help:

Describe the balance of payments identity and discuss its implications under the fixed and flexible exchange rate regimes.

Answer:  The balance of payments recognize holds that the combined balance on the current and capital accounts must be equal in size, but reverse in sign, to the change in the official reserves: BCA + BKA = -BRA. Within the pure flexible exchange rate regime, central banks do not engage in official reserve transactions. So, the overall balance should balance, that is BCA = -BKA. Within the fixed exchange rate regime, though, a country can have an overall BOP surplus or deficit since the central bank will accommodate it via official reserve transactions.


Related Discussions:- Describe the balance of payments identity

Commodities exchange, Explain the organization and function of commodities...

Explain the organization and function of commodities exchange

Define relationship between bond''s market price and its ytm, What is the r...

What is the relationship between a bond's market price and its promised yield to maturity?  Explain. A bond's market price relies on its yield to maturity abbreviated as YTM.  Wh

What are the benefits of collecting early and how it attempt, What are the ...

What are the benefits of "collecting early" and how do companies attempt to do this? A fund has time value.The sooner money is collected the better.  Companies utilize regional

Bonds Valuation, Six years ago . the singleton company sold a 20 year bond ...

Six years ago . the singleton company sold a 20 year bond with a 14% annual coupon rate and a 9% call premium. today, singleton called the bonds. the bonds originally were sold at

Explain money have time value, Why does money have time value? Positive i...

Why does money have time value? Positive interest rates point out that money has time value.  While one person lets another borrow money, the first person needs compensation in e

Break even period, It is also important to compare the returns from t...

It is also important to compare the returns from the equity stock and the bond to determine the profitability of both investments. We have seen above that the div

Interest rates over the business cycle, Interest rates are the key de...

Interest rates are the key determinants of business cycles in emerging market countries. In the past, several economies had experienced frequent and great changes

What is percentage of sales method, Q. What is Percentage of Sales Method? ...

Q. What is Percentage of Sales Method? Percentage of Sales Method: - Under this process certain key ratios based on past year's information are established. These ratios is abl

Inventory is sometimes thought of as a necessary evil, Inventory is sometim...

Inventory is sometimes thought of as a necessary evil.  Explain. Inventory ties up funds and these funds aren't earning an unambiguous return.  Some inventory is habitually nec

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd