Changes in Balance of Payments TerminologySince the current
edition of International Economics: Theory and Practice went
to press, the Bureau of Economic Analysis announced changes to the
way in which the U.S. Balance of Payments is reported. The example
in the text (the 1997 Balance of Payments) uses the old
classification, but articles or citations you read in the future may
incorporate the new terminology.
The most significant change is that the accounts are now divided
into three main groupings instead of the standard current and
capital accounts. What was called the capital account (purchases and
sales of assets, direct investment, etc.), is now called the
financial account. The former current account has been split
in two, the current account and the capital account,
to better separate current income from changes in the stock of
assets. The current account is still used for purchases and sales of
goods and services and current income. The new capital account is
primarily used for one time changes in the stock of assets. It now
includes unilateral current transfers which were in the current
account but are really shifts in assets, not current income. The
most significant item is debt forgiveness, which if kept in the
current account could generate misleading swings in the current
account. Also included in the new capital account are migrant
transfers, those assets which are brought with a migrant when they
move, as well as the sale or purchase of rights to natural resources
or patents. The table below gives some examples of transactions
whose classification has changed.
Examples of Transactions That Have Been Reclassified
of goods and services are recorded in the current account in the
same manner as before.
||Placement in U.S.|
|A U.S. citizen purchases an Italian bond
||Capital Account Debit
||Financial Account Debit|
|A Japanese citizen purchases U.S. Treasury bills
||Capital Account Credit
||Financial Account Credit|
|The U.S. government forgives debt owed to it by
||Current Account Debit
||Capital Account Debit|
|A Canadian citizen immigrates to the United States and
transfers a bank account to the U.S.
||Current Account Credit
||Capital Account Credit|
The offsetting bookkeeping for all non-transfer items will still
take place between the current and financial accounts just as it is
described in the text between the current and capital accounts.
Entries for transfers in the current and financial accounts are
offset by the entries for current and capital transfers. When the
central bank does not intervene (and hence the balance of payments
sums to zero), the sum of all three accounts will equal zero. In
general the capital account will be much smaller than the current or
financial accounts, especially for the United States.
A description of the changes along with revised estimates for
1982-98 can be found in the article by Christopher Bach, "U.S.
International Transactions, Revised Estimates for 1982-98,"
Survey of Current Business, 79 (July 1999):60-74. (Web
These changes were made in conjunction with the IMF's new standards.
A description of these new standards can be found in "The
International Monetary Fund's New Standards for Economic
Statistics," Survey of Current Business, 76 (October