TEIL1 Flashcards
Current Account
CA = TB + BPI + BSI
Capital Account (KA)
KA = Net Receipt of Capital Transfers - Net Acq. of Nonproduced/Fin. Assets
i. Capital Transfers received and granted
* Debt forgiveness
ii. Acquistion and Disposal of nonproduced/Nonfinacial
- Licenses
- Leases
- NOT JUST TEMPORARELY SOLD (Vgl. BPI)
Financial Account
Caputres financial assets & liability transactions between residents and non residents
i. Foreign direct Investment
ii. Portfolio Investment
iii. Other Investment
iv. Reserves
FA = Net Acquistions of Foreign Fin. Assets
- Net Incurrence of For. Fin. Liabilites
Laspeyres Index
- Using Prices of Base Year 0
Paasche Index
- Using Prices of Final Year T Only
*
Annual Chain Weight
Annualy updating of the base year
Private Saving
- Savings of the Privat Sector
S(Pvt) = Y + BPI + BSI - T + GT - C
Goverment Savings
S(Gov) = T - GT - G
National Savings
S = S(Priv) + S(Gov)
S = I + CA
National Savings can be allocated for two uses
- Funding the domestic accumulation of physical capital (through I)
- Funding the Current Account balance, that is being a net lender to the rest of the world (if CA>0)
National Wealth
- is the total wealth of the residents of an economy
National Wealth = K + (FOA - FOL)
K: Domestic Economy Capital Stock
- Domestic Wealth
Net International Investment Positon (NIIP)
- (FOA - FOL)
- Domestic Wealth Abroad
Capital Accumulation Function
Kt+1 = It + (1-D)*Kt
Pro-Cyclical
Buisness-Cycle Correlation is Positive
Counter-Cylical
Buisness-Cycle Correlation is Negative
A-Cyclical
Buisness-Cycle Correlation is near Zero
NDP
Net Domestic Product
= GDP - (Consumption of fixed Capital Depreciaton)
- Net measures conveys how much income is available if the value of the produtive capacities is to be maintained
Insurance Premium paid to a foreign country - BPI or BSI?
BSI
GNP
Gross National Product =
GDP + BPI
- Domestic RESIDENTS irrespectively where they earned it
GDP
- within border of the domestic economy
- irrespectively of residents nationality
BPI
BPI =
+ Primary Income Received from Nonresidents
- Primary Income Paid to Nonresidents
Primary Income Received
represents the return received by residents for providing to non-residents temporarly
- labor
- financial resources (dividends, interest income)
- non produced non financial assets (licenese, leases,..)
Secondary Income Received from Nonresidents
represents the return received by residents without providing a corresponding return of an intem of economic value
- remittances (Geld nachhause schicken)
- social contributions
- insurance premiums
- tax
Balance of Payments
accounting system in Macro that we use to record any cross border economic transactions from residents to non-residents
Price Level
Price Level
= Nominal GDP / Real GDP
Laypeyres
Using prices of base year 0 only
- Laspeyres overstates the contribution of goods which have become cheaper
REAL GDP
- shows TRUE national income
- takes prices and inflation therefore into consideration
Rate of Inflation
GDP DEFLATOR based inflation
= gYtNominal - gYtReal
GNDP
Gross National Disposal Product (GNDP)
+ GNP
+ BSI
- GNDP is income of domestic Residents plus net transfers from/to non residents
Problems GDP as a Measure of Standard of Living
- some goods are not captured in GDP
- home production, illegal activites
- changes in quality
HDI (“Human Development Index”) takes into account Health, Education,…
Core inside of BoP
If more Exports the Import then it MUST mean that we are willing to invest financial wealth abroad
Potential Problems with our Measuring of National Wealth
Our Measurment of National Wealth leaves out:
- “Human Capital”
- education & skills of the people
- “Natural Captial”
- including the economys land, forest, fossil fuels
Alternative: Use “Inclusive Wealth Index”
GDP deflator based Inflation
π = gNominal - g<strong>ANNUAL CHAIN WEIGHT</strong>
