Balance of Payments Manual

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Balance of Payments and National Accounts 10 ... Structure and Characteristics of the Capital and Financial Account 77 ... methodology are an indispensable tool for economic analysis and policy making. .... The fifth edition of the Manual provides international ... Gill (Chapter 3 and Appendix 1), Mr. Jan Bové and Mrs.

B ALANCE OF PAYMENTS M ANUAL

I N T E R N AT I O N A L M O N E TA R Y F U N D

Contents

Foreword Preface

ix xi

CONCEPTUAL FRAMEWORK I.

Introduction

3

Purposes of the Balance of Payments Manual 3 Changes from the Fourth Edition 3 Uses of Balance of Payments and International Investment Position Data 4 Structure of the Manual 5

II.

Conceptual Framework of the Balance of Payments and International Investment Position 6 Definitions 6 Principles and Concepts 6 Double-entry System 6 Concepts of Economic Territory, Residence, and Center of Economic Interest 7 Principles for Valuation and Time of Recording 7 Concept and Types of Transactions 8 Changes Other Than Transactions 9

III.

Balance of Payments and National Accounts

10

Introduction 10 Relationship Between the SNA and Principles Underlying the Balance of Payments 10 Classification 11 Integrated Economic Accounts 11

IV.

Resident Units of an Economy

20

Concept and Definition of Residence 20 Economic Territory of a Country 20 Center of Economic Interest 20 Resident Institutional Units 21 Residence of Households and Individuals 21 Residence of Enterprises 22 Residence of Nonprofit Institutions 24 General Government 24 Regional Central Banks 25

iv

CONTENTS

V.

Valuation of Transactions and of Stocks of Assets and Liabilities

26

Concept of Market Price 26 Transactions and Market Price 26 Valuing Transactions in the Absence of Market Price 26 Market Price Equivalents 26 Affiliated Enterprises 27 Noncommercial Transactions 28 Financial Items 28 Valuation of Stocks of Assets and Liabilities 28

VI.

Time of Recording

30

Principle of Timing 30 Application to Goods 30 Exceptions to the Change of Ownership Principle 31 Applications to Other Transactions 31 Other Timing Adjustments 32

VII.

Unit of Account and Conversion

33

Unit of Account 33 Conversion Principles and Practices 33 Multiple Official Exchange Rates and Conversion 34 Black or Parallel Market Rates 34

STRUCTURE AND CLASSIFICATION VIII.

Classification and Standard Components of the Balance of Payments Structure and Classification 37 Standard Components 37 Net Errors and Omissions 38 Major Classifications 38 Detailed Classifications 38 Balance of Payments: Standard Components Table Selected Supplementary Information Table 49

IX.

37

43

Structure and Characteristics of the Current Account

51

Characteristics and Classification 51 Gross Recording, Valuation, and Time of Recording 52

X.

Goods

54

Coverage and Principles 54 Definitions 54 Change of Ownership 55 Goods Classified Under Other Categories 57 Special Types of Goods 57 Time of Recording 58 Valuation 58

v

CONTENTS

XI.

Transportation

61

Definition and Coverage 61 Passenger Services 61 Freight Services and Conventions for Recording 61 Rentals of Transportation Equipment with Crew 62 Supporting and Auxiliary Services 62

XII.

Travel

64

Nature of Travel Services 64 Definition 64 Types of Travel 64 Goods and Services Covered 65

XIII.

Other Services

66

Coverage 66 Definitions 66

XIV.

Income

70

Coverage 70 Definition and Classification 70 Time of Recording of Investment Income 72 Measurement and Recording of Direct Investment Earnings 72 Stock Dividends, Bonus Shares, and Liquidating Dividends 73

XV.

Current Transfers

74

Definition and Coverage 74 Distinction Between Current and Capital Transfers 74 Classification 75 Valuation and Timing 76

XVI.

Structure and Characteristics of the Capital and Financial Account Coverage 77 Capital Account 77 Financial Account 78 Liabilities Constituting Foreign Authorities’ Reserves 82 Valuation and Timing 82

XVII.

Capital Transfers and Acquisition or Disposal of Nonproduced, Nonfinancial Assets 83 Coverage 83 Capital Transfers 83 Classification 83 Acquisition or Disposal of Nonproduced, Nonfinancial Assets 84

vi

77

CONTENTS

XVIII. Direct Investment

86

Concept and Characteristics 86 Direct Investment Enterprises 86 Direct Investors 87 Direct Investment Capital 87 Extent of Net Recording 88 Valuation of Flows and Stocks 89 Other Special Cases of Direct Investment Enterprises 89 Selected Supplementary Information 89

XIX.

Portfolio Investment

91

Coverage 91 Classification and Definitions 91 Selected Recording Issues 92 Valuation 94

XX.

Other Investment

95

Coverage 95 Classification 95 Definitions and Recording 95

XXI.

Reserve Assets

97

Concept and Coverage 97 Identification of Reserve Assets 97 Exclusion of Valuation Changes and Other Adjustments 99 Classification 99 Valuation 100 Interpretation of Changes in Reserve Assets 100

XXII.

Supplementary Financial Account Information

101

Coverage 101 Liabilities Constituting Foreign Authorities’ Reserves 101 Exceptional Financing and the Balance of Payments 102 Balance of Payments Accounting for Selected Exceptional Financing Transactions 102 Foreign Sources of Financing 103

XXIII. International Investment Position

104

Concept and Coverage 104 Classification 104 Valuation of Components 105 Relationship of the International Investment Position to External Debt 106 Investment Income, Rates of Return, and the International Investment Position 106 International Investment Position: Standard Components Table 108

vii

CONTENTS

REGIONAL ALLOCATION XXIV. Regional Statements

115

Regional Allocation Principles 115 Problems and Limitations 116 Analytical Implications 117 Selection of Regions 117

APPENDICES I.

Relationship of the Rest of the World Account to the Balance of Payments Accounts and the International Investment Position 121

II.

A Note on Sectors

III.

Balance of Payments Classification of International Services and the Central Product Classification 146

IV.

Accounting for Exceptional Financing Transactions

V.

Selected Issues in Balance of Payments Analysis

INDEX

viii

145

150 158

Foreword

Measurement of the external positions of member countries has been a central feature of International Monetary Fund operations since inception. Such measurement is conducted in the dual context of Fund responsibility for surveillance of countries’ economic policies and provision of financial assistance in support of adjustment measures to correct balance of payments disequilibria. Consequently, the Fund has a compelling interest in developing and promulgating appropriate international guidelines for the compilation of sound and timely balance of payments statistics. Such guidelines, which have evolved to meet changing circumstances, have been embodied in successive editions of the Balance of Payments Manual (the Manual) since the first edition was published in 1948. Because of the important relationship between external and domestic economic developments, timely, reliable, and comprehensive balance of payments statistics based on an appropriate and analytically oriented methodology are an indispensable tool for economic analysis and policy making. Indeed, with the growing interdependence of the world’s economies, the need for such statistics—which reflects in part the underlying movement towards greater liberalization and integration of markets—has increased over time. I am particularly pleased to introduce the fifth edition of the Manual, which addresses the many important changes and innovations that have occurred in international transactions since the fourth edition was published in 1977. The fifth edition of the Manual also addresses, for the first time, the important area of international investment position statistics. In addition, concepts in the Manual have been harmonized, as closely as possible, with those of the revised System of National Accounts 1993 and with the Fund’s methodologies pertaining to money and banking and government finance statistics.

The revised Manual has been prepared by the Fund’s Statistics Department in close consultation with balance of payments experts in member countries and international and regional organizations (including the Statistical Office of the European Communities, the Organisation for Economic Cooperation and Development, the United Nations, and the World Bank). The process underlying the revision of the Manual demonstrates the spirit of international collaboration and cooperation, and I would like to thank all of the national and international experts involved for their invaluable assistance. In this regard, I am particularly grateful to Mr. Pierre Esteva, chairman of the Fund’s Working Party on the Statistical Discrepancy in World Current Account Balances, and to Baron Jean Godeaux, chairman of the Working Party on the Measurement of International Capital Flows. Their assessments of the effects of the unprecedented changes in the conduct of international transactions contributed significantly to the revision of the structure and classification of the international accounts. I would like to commend the Manual to compilers and users around the world and to urge member countries to adopt the conceptual guidelines of the fifth edition as the basis for compiling balance of payments and international investment position statistics and for reporting this information to the Fund.

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