Capital account

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The financial account (including capital movement balance sheet) is a measure of the national accounts. It is a part of the balance of the balance of payments and includes capital movements by residents, that is, changes in the amounts of assets and liabilities to abroad. The balance of the capital account constitutes an important economic factor for evaluating the performance of an economy

Main categories of capital account

  • FDI is cross-border corporate investments (stocks, shares, long term loans ) of 10% and more of the capital, short-term relationships, reinvested earnings, and the provision of loan funds owners. In addition, the cross-border acquisition and sale of real estate is also one of the direct investment.
  • Investments in securities are investments in long-term debt and equity securities as long as they do not fall under the direct investment. Also, money market funds and money market instruments are included.
  • Financial derivatives fall under the rubric of securitized and non-securitized options and financial futures contracts. This position is distinguished from portfolio investment, because it was a question of products which can be traded on non- regulated markets since 1999.
  • Credit transactions is the name given to many different financial actions outside of portfolio investment and foreign direct investment (eg: short-and long -term financial relationships of domestic companies).
  • Other investments (eg: development assistance loans )

System

The financial account covers all asset transactions. A distinction is made ​​between facilities by residents abroad ( foreign assets ) and investments by foreigners in the domestic (foreign liabilities).

As capital exports increases in claims against foreigners and decreases of liabilities to foreigners are understood and appear as a negative position in the financial account.

Capital inflows are again, all acceptances of claims against foreigners and increases in liabilities to foreigners and establishing a positive position in the financial account dar.

For all capital transactions is important to note that they are listed in the correct sub-category of the financial account. It is also to distinguish between short -and long -term capital movements.

Inclusion in the balance of payments

  • Current account balance of trade
  • Services account
  • Balance transfer
  • Domestic net investments abroad direct investment
  • Investments in securities
  • Loans ( and other assets )
  • Direct investment
  • Investments in securities
  • Loans ( and other assets )

The balance of payments is always balanced formally, since all transactions are recorded twice. Purchases and sales of goods and wealth ( economy ) are "paid" by short-or long -term loans. In the financial account, thus there is a counter-entry or it will be made a cash payment on the foreign exchange market. This change in currency reserves is recognized in the foreign exchange balance.

In some textbooks is also distinguished (also capital account ) between capital account and financial account in a broader sense in the strict sense. Here, the capital account is in the strict sense of the foreign exchange balance, the capital account in the broader sense.

A negative sign on the capital account means that more capital was transferred abroad by residents. This situation describes a net export of capital ( capital account deficit ), claims on foreigners have increased.

If, however, a positive sign in the financial account yet, more capital was paid by foreigners into the country. This describes the situation of a net capital inflow ( capital account surplus ), the liabilities to foreigners increased.

Examples

  • ( a) A German exporter provides for € 4 million apples to Bulgaria based on a 90-day loan ( ie: the Bulgarian importer is a liability of € 4 million a )
  • ( b) A German receives a dividend from a factory owned by him abroad in the amount of € 2 million, which he uses again for reinvestment for this factory.
  • ( c ) A German importer retails for € 15 million washing machines from an American manufacturer and paid for this purchase with the help of a loan from an American bank that financed this business.

According to the International Monetary Fund in 2006 were, on balance ( capital exports minus imports ), the largest capital exporters China, Japan, Germany and Russia, with shares of all net capital exports in the world of 13.5 %, 12.2%, 8.8% and also 8.8%.

By far the largest net capital importer, the U.S. was in 2006 with 63.7 %, followed by Spain 7.4%, UK 4.1% and Australia with 3.0 %. Respectively on the net imports of the world

Accounts receivable Invisible balance Good (economics)
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