THE BALANCE OF PAYMENTS: MFTHODS OF PRESENTATION the most useful and - PDF document

THE BALANCE OF PAYMENTS: MFTHODS OF PRESENTATION the most useful and meaningful form of difgerences in fjnancial structure between one However, the many a ' surplus' or 'defjcit '. and in organising discussion of ways of defjning standardising balance of payments concepts Fund has done much valuable work in Monetary International The presentation. Much thought has been put into devising purposes for which the accounts are used, have reserves to form a more relevant group. ments might be bracketed with those of the gold of liquid assets and liabilities whose move­ international payments. There are other forms reserves are not the only ready means of making aid to its own exports. On the other hand, gold country which 'ties ' any of its economic loan current items; for example, in the case of a strong causal connections between capital and of outright gifts. Moreover, there may be very country and another, and perhaps the difgerent made it impossible for a uniform defjnition to the increasing importance of economic aid merit according to the standpoint from which " distinguishing between capital and income. and morgues of the world are full of tbose who have given up as a bad job the admittedly diffjcult task of the workhouses, gaols • • H • (a) In a private letter written shortly before he died, Sir Dennis Robertson wrote, transactions and the factors underlying them. it is desired to review the record of international particular presentation will have more or less be adopted generally. Recently there has been presenting balance of payments accounts. Any that there is no single valid or useful way of learned from each of them, but of emphasising the aim not merely of showing what can be possible ways of presenting the accounts, with article is to discuss three out of a number of U.S. balance of payments. The purpose of this is at present considering the presentation of the Committee for Balance of Payments Statistics ticularly in the United States where a Review a good deal of interest in this subject, par­ which may take the form either of loans or example of the diffjculty has grown up with Intsoductjon ticular groups of items. Analytically, perhaps the most obvious dis­ groups. degree between the items allocated to difgerent too great a difgerence of kind rather than of is a risk of implying too sharp a contrast, On the other hand, there becomes confused. and discussion of the balance of payments grouping and simplifjcation, the presentation Without some such some way, and look at developments in par­ capital transactions. On the analogy with com­ is necessary to divide the component items in to assess performance from such an account it minus) the total will necessarily be zero. Thus, each entry is given an appropriate sign (plus or If every credit there is a corresponding debit. a double-entry book-keeping account so that for accounts are normally presented in the form of payments of Balance tinction to make would be between current and pany or personal accounting, the strength of between current and capital items/a) and a new a distinction was drawn between movements to make a clear-cut or signifjcant division It is often diffjcult have their shortcomings. Both these approaches are useful but both country had ultimately to protect its gold stock. making international payments and that a one that gold was the main ready means of The reason for this approach was the obvious of all other items taken together on the other. in this item on the one hand and movements by changes in the country's gold stock; the current balance may be said to show were developed, performance was fjrst judged Historically, as balance of payments accounts of the U.K. balance of payments. some prominence in the offjcial presentations monetary authorities; and it is of course given some analysts, including a number of foreign tinction is regarded as the fundamental one by This dis­ upon its stock of external assets. or not; to what extent it is adding to or drawing whether a country is living within its income 276

The standard +228 +173 1960 4,119 3,733 -386 + 128 -258 92 10 -314 -188 + -446 +256 + 119 +397 + 2 -151 -177 +190 1961 4,019 119 -133 -127 -1l8 10 9 The method offjcially em- -202 1959 3,624 3,522 -102 +255 + 153 - 9 6 -31l +176 -259 -106 - 67 + 37 + 133 + 8 + 3,892 +126 + 84 -155 +183 - 92 1963 4,335 4,286 +162 +113 97 8 -309 +259 - 42 + -Ill - 49 +144 +153 (1) A decrease in liabilities or an increase in assets is shown -, an increase in liabilities or a decrease in assets +. (2) Including changes in liabilities in non-sterling currencies (net). (3) Excluding liabilities to the International Monetary Fund. Before 1963, comprising changes in overseas sterling holdings and acceptances outstanding. (4) Comprising changes in the United Kingdom's subscription to the I.M.F. and in sterling liabilities to the Fund. -379 + 126 16 1962 29 -321 +416 + 50 + 49 - 8 -356 + - 31 - 20 4,066 + 84 3,994 - 72 + 187 +115 91 13 -253 +250 -107 + 8 + 23 -284 6 Other U.K. offjcial long-term capi­ Current account Imports (f.o.b.) Exports and re-exports (f.o.b.) Visible trade (net) Invisibles (net), including govero­ ment Current balance ... Long-term capital account(l) Inter-government loans (net) tal (net) THE STANDAR D PR ESENTATION Private investment: Abroad In the United Kingdom Balance of long-term capital Balance of current and long­ term capital transactions Balancing item - Miscellaneous capital (net)!2) Changes in: £ millions TABLE I: overseas sterling area currencies In detail there are some points of difgerence presentation ployed for the United King- dom may be seen in Table 1 of United King­ dom Balance of Payments, 1964 (H.M.S.O., August 1964). For convenience a shortened version covering the years 1957 to 1963 IS reproduced in Table I below. In broad outline, this presentation, like that of most countries, lays stress on changes in what may be called the net liquidity position. as the classes of asset and liability included BALANCE OF PAYNENTS vary from country to country. In the U.K. presentation the last group "monetary move­ ments" contains the movements in defjned classes of liquid assets and liabilities, and the upper part of the table analyses the transactions which have led to the gains and losses in the liquid items. The" balancing item" represents a gap in the analysis. That is to say, the monetary movements in a given period refmect not only the net total of known or estimated U.K. External liabilities in sterling and Monetary movements(l) (net)(3) 1958 -106 + Offjcial + 11 -195 22 + 11 + 1 13 -207 3,366 -298 3,407 + 41 +304 +345 6 -307 +165 -192 + 153 + 49 +126 110 9 Balance holdings of non-con- vertible currencies U.K. balance in E.P.U. Account with I.M.F.(4) Gold and + 75 currency reserves ... convertible of monetary move­ +216 +245 - 29 3,509 277 3.538 1957 ments ... - 49 4 4 + 97 - 29 23 +374 + 5 + 5 3