Balance of payments GapFill

The balance of payments is the measurement of a country's annual income and outgoings relative to the rest of the world. There are a number of different economic flows which combine to produce the balance of payments, and it is important to be able to distinguish between them.

The primary measures of exchange within the balance of payments produce the current account. This consists firstly of   transfersthe balance of tradeincomethe capital account, which measures the value of exports minus the value of imports. Secondly,   international aidincomethe balance of tradetransfers earned by citizens who own assets abroad, minus the value generated from foreign-owned domestic assets. Examples of such assets could be properties or business investments. Thirdly,   international aidtransfersthe balance of tradeincome of money received from foreign governments, minus money paid out to foreign governments. Examples of this could be money the UK receives from the EU, or money the UK pays out to foreign governments in the form of  the balance of tradetruststhe capital accountinternational aid.

Another contributor to the balance of payments is   the capital accounttrustsinternational aidthe balance of trade, which represents exchanges in the ownership of assets.

The final contributor to the balance of payments is the financial account. This consists firstly of  portfolio investmentequitydirect investmentfinancial derivatives into the country by a foreign investor, minus domestic investment into a foreign country. Secondly,  direct investmentportfolio investmentequityfinancial derivatives, which measures flows of  portfolio investmentdirect investmentfinancial derivativesequity: investments that may have debts or other liabilities attached to them. Thirdly,  financial derivativesequitythe Bank of Englandreserve assets, which measures the flows of financial products that are attached to assets, such as options and futures. Finally, the value of  the Bank of Englandfinancial derivativesreserve assetsdirect investment which are held in the UK by  the Bank of Englanddirect investmentreserve assetsfinancial derivatives and in other countries by their respective monetary authorities. These include national gold stockpiles, or national possession of foreign currencies.