30 November (No group assignment this time, but help each other!)
Star Firefox. Go to World Development Indicators Online.
Pick your country, all years, and these series:
(Unfortunately, the WDI interface has just gotten worse, so you can’t get these out of “tree view” any more, and you have to scroll through the whole stinkin’ list. Sorry.)
Changes in net reserves (BoP, current US$)Current account balance (BoP, current US$)
Current transfers, receipts (BoP, current US$)
Exports of goods and services (BoP, current US$)
Foreign direct investment, net (BoP, current US$)
Foreign direct investment, net inflows (BoP, current US$)
Goods exports (BoP, current US$)
Goods imports (BoP, current US$)
Imports of goods and services (BoP, current US$)
Income payments (BoP, current US$)
Income receipts (BoP, current US$)
Net current transfers (BoP, current US$)
Net errors and omissions, adjusted (BoP, current US$)
Net income (BoP, current US$)
Net trade in goods (BoP, current US$)
Net trade in goods and services (BoP, current US$)
Portfolio investment, excluding LCFAR (BoP, current US$)
Service exports (BoP, current US$)
Service imports (BoP, current US$)
Total reserves (includes gold, current US$)
Workers' remittances, receipts (BoP, current US$)
Check everything you get says (BoP, current US$)for its units.
Get the spreadsheet and open it.
Delete any early tears without data.
Click the top right square to gray in everything. Go to format cells, number, number, 0 decimal places, use 1000 separator, OK.
Rearrange rows of data for the Current Account, and run the checks.
Goods exports (BoP, current US$)Goods imports (BoP, current US$)
Net trade in goods (BoP, current US$)
check: goods exports minus goods imports
Service exports (BoP, current US$)
Service imports (BoP, current US$)
Exports of goods and services (BoP, current US$)
check: Goods exports plus Service exports
Imports of goods and services (BoP, current US$)
check: goods imports plus service imports
Net trade in goods and services (BoP, current US$)
check: exports of goods and services minus imports of goods and services
Income receipts (BoP, current US$)
Income payments (BoP, current US$)
Net income (BoP, current US$)
check: income receipts minus income payments
Current transfers, receipts (BoP, current US$)
Workers' remittances, receipts (BoP, current US$)
(WDI does not seem to list current transfers, payments)
Net current transfers (BoP, current US$)
Current account balance (BoP, current US$)
check: net trade in goods and services plus net income plus net current transfers
Pause here, and take a look at your trade balances in recent years, and see if other data looks significant. Because this is in current dollars, not deflated dollars, these numbers may make some changes look more dramatic than they really are. But look and see if there are any movements back and forth, from trade surplus to deficit.
Look around and compare notes.
Now, step by step, go through the procedures to generate the overall financial account total that the WDI is not giving us directly.
Net errors and omissions, adjusted (BoP, current US$)Changes in net reserves (BoP, current US$)
FIGURE: Final Balance (this will be the negative of the changes in net reserves)
FIGURE:Current account balance plus Net errors and omissions
FIGURE:Final Balance minus (Current account balance plus Net errors and omissions) This is the Financial Balance.
OK, Now set up the overall balance:
Current account balance (BoP, current US$)
Financial Balance
Net errors and omissions, adjusted (BoP, current US$)
Overall balance
check: Current account balance plus Financial balance plus Net Errors and Omissions
This is not easy to follow! But try this story.
1. The current account shows how the nation got money or spent money in the course of trade and several other little things.
2. The financial account shows how the nation got money or spent money in the course of borrowing and lending. Inflows would be either borrowing or getting paid back, outflows would be either lending or paying someone else back.
3. Net errors and omissions is stuff that ought to have been counted in the current account or financial account but wasn’t.
4. The “overall balance” reflects the activities of your nation’s central bank (and the fact that this account is drawn up from the point of view of the central bank).
-- if the overall balance is positive, it means that during that year, the central bank sold of some of its stash of reserve assets to generate foreign exchange. So total reserve assets fell.
-- if the overall balance is negative, it means that during that year, the central bank used foreign exchange to add to its stash of reserve assets. So total reserve assets rose.
I realize this is counterintuitive, but a few minutes’ thought should sort it out.
What to look for: usually the main drama is between the Current and Financial accounts, and we’ll discuss some examples. But sometimes there is stuff happening with your reserves. One way to see this is to graph total reserves. Go ahead and do that. Compare notes with folks around you.
Assignment due Tuesday
This stuff is hard, and countries are different, so I will give you some choices.
Everyone:
-- graph total reserves
-- graph exports and imports of goods and services on the same graph
-- graph the current account and financial balance on the same graph
Choose one and only one of these questions to answer:
1. Does your country normally run a trade deficit or a trade surplus? If it normally runs (or for some significant time ran) a trade deficit, what kinds of financial assets was it selling to foreigners? If it normally runs (or for some significant time ran) a trade surplus, what kinds of financial assets was is buying from foreigners? Because this is not shown in the WDI data, you will have to do a little research. Why do you think it was buying or selling financial assets?
2. Does your country show a point at which it switched from having a trade surplus to having a trade deficit, or vice versa? Can you tell a story about that event, with some consideration to the financial side?
3. If your country is a significant net borrower, why? Does this strike you as a good idea? Why or why not?
4. If your country is a significant net lender, why? Does this strike you as a good idea? Why or why not?
5. Your “country” is made up of a lot of different people doing different things – the Balance of Payments data just sums their activities up. Take one of the above four questions and show how and why it might be a misleading question if it does not take into account the different activities of different groups of people.
Please make clear which of the five questions your are answering. As always, e-mail me if you have questions or difficulties.