The Balance of Payments Explained

To deal with international transactions and financial flows, economists use the Balance of Payments framework. In this video, I'll give you an introduction to that framework and show you what the two main variables are that I study: current account balances, and gross capital flows.

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Money Changes Everything: How Finance Made Civilization Possible: https://amzn.to/3mt3xbY
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To understand the effects of globalization, using the standard measurement, gross domestic product, or GDP for short, is not enough. The balance of payments framework complements GDP and is essential for any serious macro-economist. It consists of a current account (which tracks transactions that result from trade, services, wages, interest, remittances etc.) and a capital & financial account (which mostly track investment transactions such as FDI and portfolio flows).

Economists typically first look at the net position on the current account to see if there are large trade imbalances and money flows needed to finance them. After that, they add all incoming and outgoing capital flows to check if if local asset bubbles might be financed largely by offshore financial centers.

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Narrated and produced by Dr. Joeri Schasfoort (University of Cape Town)
https://twitter.com/joerischasfoort
https://www.linkedin.com/in/joeri-schasfoort/

Видео The Balance of Payments Explained канала Money & Macro