![]() Unrequited transfers across national borders are one-sided transactions. Financial transactions are recorded in the capital and financial account of the balance of payments. Transactions in goods and services are recorded in the current account of the balance of payments. Such transactions contrast with financial transactions, or changes in levels of financial assets and liabilities (for example, the repayment of principal on an outstanding loan constitutes a reduction in a liability). “Real” flows involve transactions in goods and services (such as imports, exports, travel, and shipping). Some key points in balance of payments accounting are: The example in Box 4.1 illustrates how a shipment of cars exported from Russia to Poland and involving a payment by a Polish importer through the banking system is recorded under the above conventions. In this sense, the balance of payments is always in balance. With double-entry bookkeeping, the sum of all credits should be identical to the sum of all debits, and the overall total should equal zero. Finally, the last part of the chapter presents some exercises and issues for discussion. The key concepts used in analyzing the balance of payments and external debt are introduced in following sections as well as the main developments in Poland’s balance of payments and the exchange rate of the zloty. ![]() 1 The section also examines important issues in measuring balance of payments transactions in former centrally planned economies. The first part of the chapter describes the framework the second part of the chapter focuses on the measurement of a country’s external position, drawing on the methodology developed in the Fifth Edition of the Balance of Payments Manual (hereafter known as the Manual). ![]() The purpose of this chapter is to introduce the accounting framework and key concepts used in analyzing the balance of payments and external debt. Data on the transactions and financial flows between a country and the rest of the world, which are systematically summarized in the balance of payments, form the basis of any analysis of a country’s external position and need for adjustment. Measuring and assessing the external position of a country are essential steps in the economic policymaking process.
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