Note on Understanding Balance of Payments

by: Robert E. Kennedy

Publication Date: August 20, 2009
Length: 8 pages
Product ID#: 1-428-789

Core Disciplines: Base of the Pyramid, Economics, International Business

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Teaching Note

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National governments keep track of financial flows into and out of their countries by using balance of payment (BOP) accounting, a system for measuring a country’s sources and uses of foreign exchange over a specified period of time, generally one year. Policy makers, economists, and business analysts use BOP indicators to track a country’s economic performance and position vis-à-vis the rest of the world. BOP indicators also provide insights into potential country risks. This note provides an overview of how BOP accounting works, how a BOP statement is organized, and what some of the important numbers mean.

Teaching Objectives

After reading and discussing the material, students should:

  • describe appropriate business terms and principles approriate to this case,
  • apply critical concepts from earlier learning to define a solution to the case,
  • successfully articulate data and information in support of the solution proposed,
  • critically analyze and discuss other responses and solutions to the case,
  • draw lessons from the case analysis,
  • generalize the learnings of this case to other business challenges and decisions in organizations other than the one analyzed in this case study,
  • demonstrate leadership and scholarship in analysis.