BOP Surplus

Description

Mind Map on BOP Surplus, created by 17Y6C32 KOH HUI WEN on 11/12/2017.
17Y6C32 KOH HUI WEN
Mind Map by 17Y6C32 KOH HUI WEN, updated more than 1 year ago
17Y6C32 KOH HUI WEN
Created by 17Y6C32 KOH HUI WEN over 6 years ago
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Resource summary

BOP Surplus
  1. Current Account Surplus
    1. ↑ (X-M)
      1. Relative Growth Rates
        1. Trading partner's growth rate > Growth rate of domestic country
          1. Trading partner's RNY ↑ > Domestic country's RNY ↑
            1. ↑ Purchasing power
              1. ↑ Consumption (including M)
                1. Trading partner's M is domestic country's X
                  1. ↑X > ↑M
                    1. ↑ (X-M)
        2. ↑ Competitiveness of Domestic G&S
          1. ↑ Price competitiveness
            1. Relative Inflation Rates
              1. Lower inflation rates than rest of the world
                1. X are relatively cheaper/ M are relatively more expensive
                  1. ↑ X / ↓ M as consumers switch from foreign G&S to domestic G&S
                    1. ↑ (X-M)
            2. ↑ Non-price competitiveness
              1. ↑ Quality of domestic G&S
                1. ↑ X / ↓ M as consumers switch from foreign G&S to domestic G&S
                  1. ↑ (X-M)
            3. Government Policies
              1. Exchange Rate Depreciation
                1. Domestic currency now worth less in terms of foreign currency
                  1. X becomes relatively cheaper in terms of foreign currency/ M becomes relatively more expensive in domestic currency
                    1. ↑ X / ↓ M as consumers switch from foreign G&S to domestic G&S
                      1. ↑ (X-M)
                2. Contractionary Policies (CMP & CFP)
                  1. ↓ AD (reverse multiplier)
                    1. ↓ RNY
                      1. ↓ Purchasing power
                        1. ↓ Consumption (including M)
                          1. ↓ M
                            1. ↑ (X-M)
                  2. Protectionism
                    1. Tariff
                      1. ↑ Price of M
                        1. Consumers less willing and able to buy M
                          1. Switch from M to domestic substitutes
                            1. ↓ M
                              1. ↑ (X-M)
                      2. Quota
                        1. ↓ Quantity of M
                          1. ↓ M
                            1. ↑ (X-M)
                        2. Subsidies
                          1. ↓ Unit cost of production
                            1. ↓ Price of X
                              1. ↑ X
                                1. ↑ (X-M)
                                  1. Improve BOT
                                    1. Improve Current Account
                  3. Capital and Financial Account Surplus
                    1. ↑ FDI
                      1. Changes in Exchange Rate
                        1. Appreciation
                          1. Domestic currency now worth more in terms of foreign currency
                            1. ↑ Profits when repatriated back to home country
                              1. ↑ Expected Rate of Return
                                1. ↑ FDI
                          2. Depreciation
                            1. Domestic currency now worth less in terms of foreign currency
                              1. ↓ Unit cost of production
                                1. ↑ Profits
                                  1. ↑ Expected Rate of Return
                                    1. ↑ FDI
                          3. Develop Areas of Comparative Advantage
                            1. ↑ Productivity, ↓ Unit cost of production
                              1. ↑ Expected Rate of Return
                                1. ↑ FDI
                            2. Low and Stable Inflation Rate
                              1. Sign of booming economy, ↑ certainty of streams of revenue
                                1. ↑ Expected Rate of Return
                                  1. ↑ FDI
                            3. ↑ Hot Money inflow/ ↓ Hot Money Outflow
                              1. Relative Interest Rates
                                1. Higher interest rate than rest of the world
                                  1. ↑ Expected Rate of Return
                                    1. ↑ Hot Money inflow/ ↓ Hot Money Outflow
                                2. Exchange Rate Appreciation
                                  1. Domestic currency now worth more in terms of foreign currency
                                    1. ↑ Profits when repatriated back to home country
                                      1. ↑ Expected Rate of Return
                                        1. ↑ Hot Money inflow/ ↓ Hot Money Outflow
                                          1. Improve Capital and Financial Account
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