IMF Chapter 2

Question 1

Can the Bop be in deficit in a floating exchange regime, and how about in a fixed exchange regime?

Answer 1

BoP = 0 in floating
BoP can be in disequilibrium in fixed

Question 2

What are the values of the OSB and ORA in a floating and fixed regime?

Answer 2

Both 0 in floating
ORA can take any value in fixed and OSB can be negative

Question 3

What is the Net International Investment Position?

Answer 3

NIIP = Total value of H owned assets in F - F owned assets on H

Question 4

Why is the main factor affecting the NIIP CA?

Answer 4

1. CA < 0 reduces NIIP
2. Valuation effect i.e changes in the valuation in existing assets

Question 5

Give the Formula for the BoP

Answer 5

BoP = CA + K + ORA

Question 6

What does a BoP deficit mean for the currency?

Answer 6

That there is an excess supply of said currency