ABSTRACT
This chapter explains the balance of payments (BoP), using the International Monetary Fund (IMF) presentation style and methodology. A BoP statement measures the flow of economic transactions between residents of one country and residents of the rest of the world during a given time period, such as a month, quarter, or year. The chapter shows the five major parts of a BoP statement, namely, the current account (CA), capital account (KA), financial account (FA), net errors and omissions (NEO), and reserves and related items (RRI). RRI includes changes in a nation's official international reserves, which are assets a nation's central bank and/or government authority can use to purchase its domestic currency in the foreign exchange markets. The BoP identity is valid so long as all international transactions are accurately identified and measured. In practice, understandable imbalances occur due to data collection problems, caused mainly by accidentally misreported figures, incomplete information, illegal transactions that were not reported, and measurement errors.
