key term - Balance of payments

Definition

The balance of payments is a comprehensive record of all economic transactions between the residents of a country and the rest of the world during a specific period. It includes trades in goods and services, cross-border investments, and financial transfers.

Related terms

Current Account: This captures the net trade in goods and services, plus earnings on overseas investments minus payments made to foreign investors.

Capital Account: It records all transactions involving domestic and foreign ownership of assets, including direct investments, securities, and currencies.

Financial Account: This part details the changes in domestic ownership of foreign assets and foreign ownership of domestic assets, including investment flows.