Theme 7. Balance of payments

A large number of private sector, international, and intergovernmental organizations are actively involved in the area of what may loosely be called "international securities markets regulation." Only the European Community (EC) has achieved a supranational legislative "umbrella" for international market operations, and such an arrangement is highly unlikely to be duplicated by other regional groupings or extended into a multilateral setting for the foreseeable future. Formal cooperation among national regulators is slowly being advanced, however, through the International Organization of Securities Commissions (IOSCO).

IOSCO was established as an inter-American organization in 1974. Originally called the "Inter-American Association of Securities Commissions and Similar Organizations," the institution was initiated by the World Bank and the Organization of American States in order to assist in the development of Latin American securities markets. Its activities during its first decade of existence were limited to annual conferences. The decision to become a global organization was taken in 1984, and the first annual conference held outside North

America was in Paris in 1986. It was at this conference that the decision was taken to create a secretariat, and Canadian Paul Guy was named to the new post of secretary general. It took several years more until the organization could claim at least to comprise all the world's major markets - Japan and Germany were only admitted as members in 1988.

IOSCO Functions:

The member agencies of IOSCO have proclaimed four broad aims for the organization:

- to cooperate together to ensure a better regulation of the markets, on the domestic as well as on the international level in order to maintain just and efficient securities markets;

- to exchange information on their respective experiences in order to promote the development of domestic markets;

- to unite their efforts to establish standards and an ef fective surveil lance of international securities transactions;

- to provide mutual assistance to ensure the integrity of the markets by a rigorous application of the standards and by effective enforcement against offences.

Theme 7. Balance of payments

1. The notion of balace of payments and its characteristic

2. Concept and Types of Transactions. National accounts.

3. Princeples and structure of balance of payments.

1. The notion of balace of payments and its characteristic

The balance of payments is

Balance of Payment is a record pertaining to a period of time; usually it is all annual statement. All the transactions entering the balance of payments can be grouped under three broad accounts; (1) Current Account, (2) Capital Account, and (3) Official International Reserve Account. However, it can be vertically divided into many categories as per the requirement.

Transactions, for the most part between residents and nonresidents, consist of those involving goods, services, and income; those involving financial claims on, and liabilities to, the rest of the world; and those (such as gifts) classified as transfers, which involve offsetting entries to balance—in an accounting sense—one-sided transactions. A transaction itself is defined as an economic flow that reflects the creation, transformation, exchange, transfer, or extinction of economic value and involves changes in ownership of goods and/or financial assets, the provision of services, or the provision of labor and capital.

Closely related to the flow-oriented balance of payments framework is the stock-oriented international investment position. Compiled at a specified date such as year end, this investment position is a statistical statement of (1) the value and composition of the stock of an economy’s financial assets, or the economy’s claims on the rest of the world, and (2) the value and composition of the stock of an economy’s liabilities to the rest of the world. In some instances, it may be of analytic interest to compute the difference between the two sides of the balance sheet. The calculation would provide a measure of the net position, and the measure would be equivalent to that portion of an economy’s net worth attributable to, or derived from, its relationship with the rest of the world. A change in stocks during any defined period can be attributable to transactions (flows); to valuation changes reflecting changes in exchange rates, prices, etc.; or to other adjustments (e.g., uncompensated seizures). By contrast, balance of payments accounts reflect only transactions.

The basic convention applied in constructing a balance of payments statement is that every recorded transaction is represented by two entries with equal values. One of these entries is designated a credit with a positive arithmetic sign; the other is designated a debit with a negative sign. In principle, the sum of all credit entries is identical to the sum of all debit entries, and the net balance of all entries in the statement is zero.

In practice, however, the accounts frequently do not balance. Data for balance of payments estimates often are derived independently from different sources; as a result, there may be a summary net credit or net debit (i.e., net errors and omissions in the accounts).

Date: 2014-12-28; view: 996