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2020 | OriginalPaper | Chapter

6. Balance of Payments Issues and Exchange Rate Movements

Author : Peijie Wang

Published in: The Economics of Foreign Exchange and Global Finance

Publisher: Springer Berlin Heidelberg

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Abstract

Therefore, this approach is all about the current account of the balance of payments, paying no attention to the capital account and the financial account of the balance of payments. Although the model is on the interaction between the exchange rate and the current account balances, it is largely applied to evaluate the effect of currency depreciation or currency appreciation on the balance of payments current account. In particular, it is applied to examine if a kind of currency depreciation helps improve current account balances. The current account balance examined here is, more exactly, trade balance defined as exports minus imports, leaving out income receipts/payments and current transfers:

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For Germany, the current account is in place for trade balance in part (a) and it is FDI against the current account only in part (b) due to the limited availability of trade balance data over a short time period.

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Title: Balance of Payments Issues and Exchange Rate Movements
Author: Peijie Wang
Publisher: Springer Berlin Heidelberg
Book: The Economics of Foreign Exchange and Global Finance
Print ISBN: 978-3-662-59269-4

Electronic ISBN: 978-3-662-59271-7

Copyright Year: 2020
DOI: https://doi.org/10.1007/978-3-662-59271-7_6