Forward-looking Market Instruments Free Essay Example, 2250 words

The balance of payments role is to record all the countries international transactions (Melvin Norrbin, 2013). This includes all the payments and receipts that are undertaken across the county s borders. International trade in the form of imports and exports is the main avenue where the balance of payments applies. The payments use the concept of a double-entry bookkeeping system (Melvin Norrbin, 2013). In this particular case, each and every transaction has both a debit and credit entry. The system works in a very simple manner, for instance, if credits exceed the debts, it is always concluded that there is a deficit of the surplus. The balance of payments normally upholds the current account (Melvin Norrbin, 2013). It is the sum of merchandise, all investment income, and all services and transactions offered as well as unilateral transfer accounts. Any deficit in the existing account is more often than not balanced by the capital account surplus (Melvin Norrbin, 2013). Balanc e of payments plays an important role in the international markets (Melvin Norrbin, 2013). The dollar is the most used currency in transacting international trade among most nations (Melvin Norrbin, 2013). We will write a custom essay sample on Forward-looking Market Instruments or any topic specifically for you Only $17.96 $11.86/page To counter this, the establishment of international reserve currencies did help to offset this condition in a great way. Balance of trade is normally achieved by subtracting all the merchandise imports from the merchandise exports in order to arrive at the final figure. Further, the settlement balance reflects on all the financial assets held by all international monetary agencies and all the reserve assets transactions.