Abstract

The Balance of Payments Textbook, like the Balance of Payments Compilation Guide, is a companion document to the fifth edition of the Balance of Payments Manual. The Textbook provides illustrative examples and applications of concepts, definitions, classifications, and conventions contained in the Manual and affords compilers with opportunities for enhancing their understanding of the relevant parts of the Manual. The Textbook is one of the main reference materials for training courses in balance of payments methodology.

© 1996 International Monetary Fund

Cataloging-in-Publication Data

Balance of payments textbook.—Washington, DC, USA:

International Monetary Fund, © 1996.

viii, 150 p.

Companion volume to: Balance of payments manual. 5th ed. and Balance of payments compilation guide.

ISBN 9781557755704

1. Balance of payments—Statistics.

I. International Monetary Fund.

HG3882.B342 1996

Price: US$25.00

Please send orders to:

International Monetary Fund, Publication Services

700 19th Street, NW, Washington, DC 20431, USA

Telephone (202) 623-7430 Telefax (202) 623-7201

Internet: publications@imf.org

Contents

  • Foreword

  • I. The Balance of Payments Conceptual Framework

    • Definition of the Balance of Payments

    • Double Entry System

    • Concept of an Economy

    • Principles for Valuation and Time of Recording; Unit of Account and Procedures for Conversion

    • Coverage of the Balance of Payments

  • II. Residents of an Economy

    • Definition of Residents

    • Households and Individuals

    • Enterprises

    • Nonprofit Institutions

    • Government

  • III. Classifying Balance of Payments Transactions

    • Structural Overview of the Standard Components

    • Goods, Services, and Income

    • Current Transfers

    • Capital Account

    • Financial Account

    • International Investment Position

    • Standard Components of the Balance of Payments

    • Selected Supplementary Information

    • Standard Components of the International Investment Position

  • IV. Goods

    • Convention for Recording Change of Ownership

    • Exceptions to the Change of Ownership Rule

    • Physical Movement of Goods and the Goods Component

    • Time of Recording

    • Valuation

    • Adjustments to Basic Data

  • V. Services

    • Transportation Services

    • Travel

    • Other Services

    VI. Income

    • Definition

    • Compensation of Employees

    • Investment Income

  • VII. Current Transfers and the Capital Account

    • General Information on Transfers

    • Current Transfers

    • Capital Transfers

    • Transactions in Non-Produced, Nonfinancial Assets

  • VIII. Introduction to the Financial Account

    • Definition and Coverage

    • Transactions in Financial Assets

    • Financial Item Changes to Be Excluded from the Balance of Payments

    • Net Recording

    • Valuation and Timing

    • Classification

    • Supplementary Classifications

  • IX. Direct Investment

    • The Concept of Direct Investment

    • Motivation for Direct Investment

    • Defining the Direct Investment Relationship

    • Direct Investment Capital

    • Direction of Investment

    • Valuation

    • Special Cases

  • X. Portfolio Investment

    • Equity

    • Bonds and Notes

    • Money Market Instruments

    • Financial Derivatives

  • XI. Other Investment

    • Trade Credits

    • Use of Fund Credit and Loans from the Fund

    • Other Loans

    • Currency and Deposits

    • Other Assets and Liabilities

  • XII. Reserve Assets

    • Reserve Assets and the Adjustment Process

    • The Relationship Between Reserve Assets and Liabilities

    • Coverage of Reserve Assets

    • Transactions with the International Monetary Fund

  • XIII. The International Investment Position

    • Balance Sheets and the International Investment Position

    • The Relationship between the International Investment Position and the Balance of Payments

    • Calculation of Price and Exchange Rate Changes

    • Classifying the International Investment Position

    • Valuation of the International Investment Position

    • A Practical Example of International Investment Position Compilation

Foreword

The Balance of Payments Textbook (the Textbook) is the second of two companion documents to the fifth edition of the Balance of Payments Manual (the Manual), which was published by the International Monetary Fund in 1993. The fifth edition of the Manual addresses the many important changes that have occurred in international transactions, harmonizes (as closely as possible) balance of payments concepts with the revised System of National Accounts 1993 and other IMF statistical methodologies, and covers the important topic of international investment position statistics. The Balance of Payments Compilation Guide, published by the IMF in 1995, offers practical direction for using established and emerging data sources and applying or adapting a variety of methods to compile statistics for the balance of payments and the international investment position. Publication of the Balance of Payments Textbook completes the trilogy that provides a comprehensive range of information on the compilation of balance of payments statistics and will, it is hoped, make a significant contribution to the understanding of balance of payments issues.

The Textbook is intended as one of the main reference materials for training courses in balance of payments methodology. Such courses may be conducted—under the aegis of the IMF Institute—by the Statistics Department at IMF headquarters in Washington, DC or organized externally. The Textbook is designed to provide illustrative examples and applications of concepts, definitions, classifications, and conventions contained in the Manual and to afford compilers with opportunities for enhancing their understanding of the relevant parts of the Manual.

The Textbook was produced by the IMF Statistics Department under the supervision of Mr. Mahinder S. Gill, assistant director, Balance of Payments and External Debt Division I (BOPED I). The task of drafting and finalizing the Textbook was undertaken by Mr. Peter Harper, an economist in BOPED I. Ms. Nancy W. Basham edited and coordinated print production of the Textbook, and Ms. Suzanna Persaud, administrative staff assistant in BOPED I, typed the final version.

I am hopeful that the Textbook, as part of the comprehensive range of documentation on balance of payments methodology now available, will make a significant contribution to the training of compilers as well as users of balance of payments statistics.

John B. McLenaghan

Director, Statistics Department

International Monetary Fund