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

State the economic conditions of cost of capital, State the economic condit...

State the economic conditions of cost of capital General economic conditions These include demand for and supply of capital within the economy and level of expected inflatio

What is corporate social responsibility, (a) The term "financial reporting"...

(a) The term "financial reporting" incorporates not only financial statements, but also includes other means of communicating financial and non-financial information. Financial rep

182-day t-bills, 182-Day T-Bills Following the Sukhamoy Chakravarty Com...

182-Day T-Bills Following the Sukhamoy Chakravarty Committee recommendations, in November, 1986, 182-day T-bills were introduced in order to develop the short-term money market

Binomial model, The option features embedded in many bonds and fixed-...

The option features embedded in many bonds and fixed-income securities have made the binomial interest rate tree approach a valuable model for pricing debt. Binomial

Cost of retained earnings and external equity, Expalin the basic concept of...

Expalin the basic concept of financial management and Cost of Retained Earnings and External Equity??? Also explain the hoe can ew calculate the external equity? Help me

What is current asset, Q. What is Current Asset? Current Asset - ASSET ...

Q. What is Current Asset? Current Asset - ASSET which one can reasonably expect to convert into cash, sell or consume in operations within a single operating cycle or within a

Please identify the largest potential threat, Using Southwest Airlines as a...

Using Southwest Airlines as an example, please identify the largest potential threat, the strategy employed, and what types of capital budgeting projects would be used to operation

Rationale for corporate governance, Rationale for corporate governance ...

Rationale for corporate governance The organization of the world economy (particularly in present years) has seen corporate governance gain prominence mostly since: Insti

What is a marginal cost of capital schedule (mcc), What is a marginal cost ...

What is a marginal cost of capital schedule (MCC)?  Is the schedule always a horizontal line?  Explain. The marginal cost of capital schedule is a graphic representation of the

Pvif, how do we get the pvif of a perpetuity

how do we get the pvif of a perpetuity

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