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Jump to navigation Jump to search This article is about the macroeconomic current account. The current account is an important indicator of an economy’s health. A country’s balance of trade is the net or difference between the country’s exports of goods and services and its imports of goods and services, excluding all financial transfers, investments and other components, over a given period of time. A country is said to have a trade surplus if its exports exceed its imports, and a trade deficit if its imports exceed its exports.
Because exports generate positive net sales, and because the trade balance is typically the largest component of the current account, a current account surplus is usually associated with positive net exports. In the net factor income or income account, income payments are outflows, and income receipts are inflows. From the capital account, economists and central banks determine implied rates of return on the different types of capital. In the traditional accounting of balance of payments, the current account equals the change in net foreign assets. On the other hand, if an economy is running a current account surplus it is absorbing less than that it is producing.
As the economy is open, this saving is being invested abroad and thus foreign assets are being created. US current account calculation for 2017. Normally, the current account is calculated by adding up the 4 components of current account: goods, services, income and current transfers. Goods Being movable and physical in nature, goods are often traded by countries all over the world. When a transaction of certain good’s ownership from a local country to a foreign country takes place, this is called an “export”. The other way around, when a good’s owner changes to a local inhabitant from a foreigner, is defined to be an “import”.
Where CA is the current account, X and M are respectively the export and import of goods and services, NY the net income from abroad, and NCT the net current transfers. A current account deficit is not always a problem. The Pitchford thesis states that a current account deficit does not matter if it is driven by the private sector. It is also known as the “consenting adults” view of the current account, as it holds that deficits are not a problem if they result from private sector agents engaging in mutually beneficial trade. A deficit implies we import more goods and services than we export. Transactions are either marked as a credit or a debit.
Within the BOP there are three separate categories under which different transactions are categorized: the current account, the capital account and the financial account. In the current account, goods, services, income and current transfers are recorded. Absent changes in official reserves, the current account is the mirror image of the sum of the capital and financial accounts. One might then ask: Is the current account driven by the capital and financial accounts or is it vice versa? The traditional response is that the current account is the main causal factor, with capital and financial accounts simply reflecting financing of a deficit or investment of funds arising as a result of a surplus. Current account surpluses are facing current account deficits of other countries, the indebtedness of which towards abroad therefore increases. According to Balances Mechanics by Wolfgang Stützel this is described as surplus of expenses over the revenues.
In 2011, it was the highest deficit in the world. New evidence, however, suggests that the US current account deficits are being mitigated by positive valuation effects. 90 with each quarter between 2013 Q1 through 2015 Q2 ranging from a low of 31. 96 in Q4 2014 to a high of 75.
The United States’ current account balance in Q2 2015 was down to 73. The current balance in 2013 as a percentage of GDP was 1. 82 with each quarter between 2013 Q1 through 2015 Q2 ranging from a low of 54. 13 in Q3 2013 to a high of 68. Germany’s current account balance in Q2 2015 was up to 68. The current balance in Q2 as a percentage of GDP was 8. 76 in Q1 2013 to a high of 0.
Greece’s current account balance in Q2 2015 was up to 0. The current balance in Q2 as a percentage of GDP was 0. The report also compares countries on services balance, exports of services, import of services, goods balance, export of goods and imports of goods in billions of US dollars. Moreover, in practice, private capital often flows from developing to advanced economies.