Australia's Current Account

Australias Current Account. Use the following data from the International Monetary Fund to answer questions 1 through 4.
Assumptions (millions of US dollars)

1998

1999

2000

2001

2002

2003

2004

2005

2006

Goods: exports
Goods: imports
Balance on goods

55,884
-61,215
-5,331

56,096
-65,857
-9,761

64,052
-68,865
-4,813

63,676
-61,890
1,786

65,099
-70,530
-5,431

70,577
-85,946
-15,369

87,207
-105,238
-18,031

106,969
-120,372
-13,403

124,913
-134,509
-9,596

Services: credit
Services: debit
Balance on services

16,181
-17,272
-1,091

17,399
-18,330
-931

18,677
-18,388
289

16,689
-16,948
-259

17,906
-18,107
-201

21,205
-21,638
-433

26,362
-27,040
-678

28,442
-29,360
-918

33,088
-32,219
869

Income: credit
Income: debit
Balance on income

6,532
-17,842
-11,310

7,394
-18,968
-11,574

8,984
-19,516
-10,532

8,063
-18,332
-10,269

8,194
-19,884
-11,690

9,457
-24,245
-14,788

13,969
-35,057
-21,088

16,969
-43,746
-26,777

21,748
-54,131
-32,383

2,651
-2,933
-282

3,003
-3,032
-29

2,622
-2,669
-47

2,242
-2,221
21

2,310
-2,373
-63

2,767
-2,851
-84

3,145
-3,414
-269

3,262
-3,625
-363

3,698
-4,092
-394

1998

1999

2000

2001

2002

2003

2004

2005

2006

4.1. What is Australia's balance on goods?

(goods exports - goods imports)

-5,331

-9,761

-4,813

1,786

-5,431

-15,369

-18,031

-13,403

-9,596

4.2. What is Australia's balance on services?

(services credit - services debit)

-1,091

-931

289

-259

-201

-433

-678

-918

869

4.3. What is Australia's balance on goods and services?

(balance on goods + balance on services)

-6,422

-10,692

-4,524

1,527

-5,632

-15,802

-18,709

-14,321

-8,727

-18,014

-22,295

-15,103

-8,721

-17,385

-30,674

-40,066

-41,461

-41,504

Current transfers: credit

Current transfers: debit
Balance on current transfers
Questions

4.4. What is Australia's current account balance?

(the sum of the four balances listed above,
goods, services, income, and current transfers)

People's Republic of China (Mainland) Balance of Payments

Chinas (Mainland) Balance of Payments. Use the following Chinese balance of payments data from the IMF to answer questions 5 through 8.

Assumptions (millions of US dollars)

1998

1999

2000

2001

2002

2003

2004

2005

2006

31,472
-47
-6,275
-18,902
-6,248

21,115
-26
5,204
-17,641
-8,652

20,518
-35
1,958
-11,748
-10,693

17,401
-54
34,832
-4,732
-47,447

35,422
-50
32,341
7,504
-75,217

45,875
-48
52,774
17,985
-116,586

68,659
-69
110,729
26,834
-206,153

160,818
4,102
58,862
-16,441
-207,342

253,268
4,020
2,642
-13,075
-246,855

1998

1999

2000

2001

2002

2003

2004

2005

2006

-6,322
"outflow"

5,178
"inflow"

1,923
"inflow"

34,778
"inflow"

32,291
"inflow"

52,726
"inflow"

110,660
"inflow"

62,964
"inflow"

6,662
"inflow"

4.6. What is China's Total for Groups A and B?

31,425

21,089

20,483

17,347

35,372

45,827

68,590

164,920

257,288

4.7. What is China's Total for Groups A through C?

25,150

26,293

22,441

52,179

67,713

98,601

179,319

223,782

259,930

4.8. What is China's Total for Groups A through D?

6,248

8,652

10,693

47,447

75,217

116,586

206,153

207,341

246,855

A.
B.
C.
D.
E.

Current account balance

Capital account balance
Financial account balance
Net errors and omissions
Reserves and related items

Questions
4.5. Is China experiencing a net capital inflow or outflow?

India's Current Account

Use the following India balance of payments data from the IMF (all items are for the current account) to answer questions 9 through 13.
Assumptions (millions of US dollars)

1998

1999

2000

2001

2002

2003

2004

2005

2006

Goods: exports
Goods: imports
Balance on goods

34,076
-44,828
-10,752

36,877
-45,556
-8,679

43,247
-53,887
-10,640

44,793
-51,212
-6,419

51,141
-54,702
-3,561

60,893
-68,081
-7,188

77,939
-95,539
-17,600

102,176
-134,702
-32,526

123,617
-166,695
-43,078

Services: credit
Services: debit
Balance on services

11,691
-14,540
-2,849

14,509
-17,271
-2,762

16,684
-19,187
-2,503

17,337
-20,099
-2,762

19,478
-21,039
-1,561

23,902
-24,878
-976

38,281
-35,641
2,640

55,831
-47,989
7,842

75,354
-63,537
11,817

Income: credit
Income: debit
Balance on income

1,806
-5,443
-3,636

1,919
-5,629
-3,710

2,521
-7,414
-4,893

3,524
-7,666
-4,142

3,188
-7,097
-3,909

3,491
-8,386
-4,895

4,690
-8,742
-4,052

5,082
-11,475
-6,393

7,795
-12,059
-4,264

Current transfers: credit

Current transfers: debit
Balance on current transfers

10,402
-67
10,334

11,958
-35
11,923

13,548
-114
13,434

15,140
-407
14,733

16,789
-698
16,091

22,401
-570
21,831

20,615
-822
19,793

24,120
-877
23,242

27,449
-1,340
26,109

1998

1999

2000

2001

2002

2003

2004

2005

2006

-10,752

-8,679

-10,640

-6,419

-3,561

-7,188

-17,600

-32,526

-43,078

-2,849

-2,762

-2,503

-2,762

-1,561

-976

2,640

7,842

11,817

4.11. What is India's balance on goods and services?

-13,601

-11,441

-13,143

-9,181

-5,122

-8,164

-14,960

-24,684

-31,261

4.12. What is the balance on goods, services and income?

-17,238

-15,151

-18,036

-13,323

-9,031

-13,059

-19,012

-31,077

-35,525

-6,903

-3,228

-4,601

1,410

7,060

8,772

780

-7,835

-9,415

Questions
4.9. What is India's balance on goods?
4.10. What is India's balance on services?

13. What is India's current account balance?

Euro Area Balance of Payments

Euro Area Balance of Payments. Use the following Euro Area balance of payments data from the IMF to answer questions 14 through 17.
Assumptions (billions of US dollars)

1998

1999

2000

2001

2002

2003

2004

2005

2006

A.
B.
C.
D.
E.

31.3
13.9
-86.1
31.2
9.6

-25.5
13.5
2.6
-2.2
11.6

-81.8
8.4
50.9
6.4
16.2

-19.7
5.6
-41.2
38.8
16.4

54.8
9.7
-16.9
-44.6
-3.0

38.8
14.3
-49.0
-36.9
32.8

79.8
20.6
-39.0
-76.9
15.6

22.5
13.9
-14.4
-44.9
22.9

1.5
11.7
129.9
-140.6
-2.6

1998

1999

2000

2001

2002

2003

2004

2005

2005

-72.1
"outflow"

16.1
"inflow"

59.3
"inflow"

-35.5
"outflow"

-7.2
"outflow"

-34.7
"outflow"

-18.4
"outflow"

-0.5
"outflow"

141.6
"inflow"

45.3

-11.9

-73.4

-14.1

64.5

53.1

100.3

36.4

13.3

4.16. What is the Euro Area's Total for Groups A through C?

-40.8

-9.4

-22.6

-55.3

47.5

4.1

61.4

22.0

143.1

4.17. What is the Euro Area's Total for Groups A through D?

-9.6

-11.6

-16.2

-16.4

3.0

-32.8

-15.6

-22.9

2.6

Current account balance

Capital account balance
Financial account balance
Net errors and omissions
Reserves and related items

Questions
4.14. Is the Euro Area experiencing a net capital inflow?

4.15. What is the Euro Area's Total for Groups A and B?

Argentina's Balance of Payments

Argentinas Balance of Payments. Argentina used a currency board to maintain its peso on a par with the U.S. dollar. However, in January 2002 the peso collapsed. Argentinas BOP could have signaled this event. Listed below is Argentinas BOP for the period 1998-2006.
Use this data to answer questions 18 through 24.
Assumptions (millions of US dollars)

1998

1999

2000

2001

2002

2003

2004

2005

2006

26,434
-29,531
-3,097

23,309
-24,103
-795

26,341
-23,889
2,452

26,543
-19,158
7,385

25,651
-8,473
17,178

29,939
-13,134
16,805

34,576
-21,311
13,265

40,387
-27,300
13,087

46,546
-32,588
13,958

Services: credit
Services: debit
Balance on services

4,854
-9,298
-4,444

4,719
-8,830
-4,111

4,936
-9,219
-4,284

4,627
-8,490
-3,863

3,495
-4,956
-1,460

4,500
-5,693
-1,193

5,288
-6,619
-1,331

6,635
-7,620
-985

7,987
-8,529
-542

Income: credit
Income: debit
Balance on income

6,134
-13,538
-7,405

6,075
-13,566
-7,490

7,420
-14,968
-7,548

5,358
-13,085
-7,727

3,039
-10,530
-7,491

3,104
-11,080
-7,976

3,721
-13,004
-9,283

4,313
-11,617
-7,304

5,674
-11,834
-6,161

802
-338
464

790
-337
453

792
-393
399

856
-431
424

818
-278
540

942
-438
504

1,110
-549
561

1,226
-742
484

1,412
-962
450

-14,482

-11,943

-8,981

-3,780

8,767

8,140

3,212

5,281

7,706

73

149

106

157

406

70

196

89

97

-2,325
7,291
4,965

-1,730
23,988
22,257

-901
10,418
9,517

-161
2,166
2,005

627
2,149
2,776

-774
1,652
878

-676
4,125
3,449

-1,311
5,265
3,954

-2,438
5,537
3,100

-1,906
10,693
5,183

-2,005
-4,780
-1,024

-1,252
-1,331
919

212
-9,715
-7,473

477
-5,117
-18,821

-95
-7,663
-8,980

-77
-9,339
-4,982

1,368
-1,731
-1,693

-1
7,921
-6,132

-437
-4,090

-642
-2,013

-154
1,176

-2,810
21,405

-1,890
13,402

-1,428
9,077

548
6,993

377
-7,644

1,556
-14,247

-7,542
-14,482

-4,906
-11,943

-1,832
-8,981

3,522
-3,780

15,717
8,767

15,611
8,140

11,934
3,212

12,101
5,281

13,417
7,706

A. Current Account
Goods: exports
Goods: imports
Balance on goods

Current transfers: credit

Current transfers: debit
Balance on current transfers
Current Account Balance (Group A)
B. Capital Account (Group B)
C. Financial Account
Direct investment abroad
Direct investment in Argentina
Direct investment in Argentina, net
Portfolio investment assets, net
Portfolio investment liabilities, net
Balance on other investment assets and liabilities, net
D. Net Errors and Omissions
E. Reserves and Related Items
Questions
4.18. What is Argentina's balance on goods and services?
4.19. What is Argentina's current account balance?
4.20. What seems to have been the primary driver in
Argentina's current account balance?
4.21. What is Argentina's financial account balance?
4.22. What is Argentina's Total for Groups A through C?
4.23. What is Argentina's Total for Groups A through D?

income debit
18,936
4,527
4,090

income debit
14,449
2,655
2,013

income debit
7,853
-1,022
-1,176

income debit
-14,971
-18,595
-21,405

income credit
-20,685
-11,513
-13,403

income credit
-15,860
-7,650
-9,078

income credit
-10,949
-7,541
-6,993

income credit
1,898
7,268
7,645

income credit
4,888
12,691
14,247

4.24. Argentina's current account was in deficit in the period leading up to the crisis, the 1998-2001 period shown here. Therefore it was critical that Argentina continue to attract capital inflows via the Capital Account and Financial Account to offset that. But
in 2001 capital fled the country, as illustrated by the 2001 Financial Account balance of -14,971. The post-2002 crisis period, however, has shown an economy which is attempting to make an economic recovery.

Problem 4.25 Trade Deficits and J-Curve Adjustment Paths

Assume the United States has the following import/export volumes and prices. It
undertakes a major "devaluation" of the dollar, say 18% on average against all major
trading partner' currencies. What is the pre-devaluation and post-devaluation trade
balance?
Assumptions
Initial spot exchange rate, $/fc
Price of exports, dollars ($)
Price of imports, foreign currency (fc)
Quantity of exports, units
Quantity of imports, units
Percentage devaluation of the dollar
Price elasticity of demand, imports
a. What is the pre-devaluation trade balance?
Revenues from exports, $
Expenditures on imports, fc
Expenditures on imports, $
Pre-devaluation trade balance
b. Resulting trade balance immediately after devaluation?
Revenues from exports, $
Expenditures on imports, fc
New spot exchange rate, after devaluation
Expenditures on imports, $
Post-devaluation trade balance (currency contract period)

Values
2.00
20.0000
12.0000
100
120
18.00%
(0.900)

$2,000
1,440
$2,880
($880)

$2,000
1,440
2.36
$3,398
($1,398)