First HW. Covering: Definitions of International Accounts, and how they fit together.
1. I have attached Table 13-2 from the textbook, covering the Balance of Payments Accounts for
2012. I have also uploaded the news release from the BEA discussing the same data for the third
quarter of 2018 (the most recent data).
a. Using the data from the BEA, create a table identical to Table 13-2 from the text, but
replace the 2012 figures with those from the first quarter of 2018 (the categories do not
b. From either the textbook, or the BEA release, what types of things are traded in the
Current Account (and its components)? In the Capital Account? In the Financial
c. From the textbook, what is the theoretical relationship between the Current Account,
Capital Account, and Financial Account? (I am looking for a simple algebraic
d. Intuitively, why does this theoretical relationship across accounts exist?
e. Do the data presented in Table 13-2 support this theoretical relationship? What about in
the table you created?
f. Find the term “Statistical Discrepancy” in the BEA document. What does it mean, and
what is its value?
2. Consider the movement of the Current Account noted in the BEA analysis.
a. Describe the movement of the Current Account between the second quarter of 2018 and
the third quarter of 2018.
b. Which component (or components of the Current Account appear to be most responsible
for this movement? (Use the values of the components to justify your answer.)
c. From the class lecture, which macroeconomic variables, if any, might explain the
movement of the component(s) you highlighted in part 2b?
3. What are the macroeconomic implications of the movement in the Current Account discussed
a. For the short run level of GDP?
b. For the level of foreign borrowing?
c. For the level of foreign debt?
EMBARGOED UNTIL RELEASE AT 8:30 A.M. EST, WEDNESDAY, DECEMBER 19, 2018
The U.S. current-account deficit increased to $124.8 billion (preliminary) in the third quarter of 2018
from $101.2 billion (revised) in the second quarter of 2018, according to statistics released by the
Bureau of Economic Analysis (BEA). The deficit was 2.4 percent of current-dollar gross domestic product
(GDP) in the third quarter, up from 2.0 percent in the second quarter.
The $23.6 billion increase in the current-account deficit mainly reflected a $24.0 billion increase in the
deficit on goods.
Current-Account Transactions (tables 1-5)
Exports of goods and services and income receipts
Exports of goods and services and income receipts decreased $6.2 billion in the third quarter to $930.3
Goods exports decreased $7.7 billion to $421.8 billion, mostly reflecting a decrease in foods,
feeds, and beverages, primarily soybeans.
Primary income receipts decreased $1.8 billion to $264.5 billion, primarily reflecting a decrease
in direct investment income. An increase in portfolio investment income partly offset the
decrease. For more information on direct investment income, see the box “Effects of the 2017
Tax Cuts and Jobs Act on Components of the International Transactions Accounts.”
Services exports increased $1.8 billion to $207.6 billion, mostly reflecting increases in charges
for the use of intellectual property, in financial services, and in other business services, primarily
professional and management services.
Imports of goods and services and income payments
Imports of goods and services and income payments increased $17.4 billion in the third quarter to
Goods imports increased $16.3 billion to $648.8 billion, mostly reflecting increases in consumer
goods, primarily cell phones, in industrial supplies and materials, primarily petroleum and
products, and in automotive vehicles, parts, and engines.
Effects of the 2017 Tax Cuts and Jobs Act on Components of the International Transactions Accounts
In the international transactions accounts, income on equity, or earnings, of foreign affiliates of U.S.
multinational enterprises in a period consists of a portion that is repatriated to the parent company in
the United States in the form of dividends and a portion that is reinvested in foreign affiliates. At times,
repatriation of dividends exceeds current-period earnings, resulting in negative values being recorded
for reinvested earnings. For the first half of 2018, dividends exceeded earnings, reflecting the
repatriation of accumulated prior earnings by foreign affiliates of U.S. multinational enterprises to their
parent companies in the United States in response to the 2017 Tax Cuts and Jobs Act (TCJA), which
generally eliminates taxes on repatriated earnings. The negative reinvested earnings in the first half of
2018 reflect the fact that U.S. parent companies withdrew accumulated prior earnings from their foreign
affiliates. Preliminary statistics for the third quarter show positive reinvested earnings and lower
dividends (see table below). The reinvested earnings are also reflected in the net acquisition of direct
investment assets in the financial account, which was $76.8 billion in the third quarter and −$207.4
billion in the first half of 2018 (table 6).
Direct Investment Earnings
Billions of dollars, seasonally adjusted
Direct investment earnings
Sum of First
p Preliminary r Revised
Effects of the 2017 Tax Cuts and Jobs Act on Components of the International Transactions Accounts
For more information, see “How does the 2017 Tax Cuts and Jobs Act affect BEA's business income
statistics?” and “How are the international transactions accounts affected by an increase in direct
investment dividend receipts?”
In addition to the repatriation of accumulated earnings, some companies made other changes to their
business practices in reaction to the TCJA. For example, some insurance companies changed how they
operate in response to the base erosion and anti-abuse tax (BEAT) provision of the TCJA. BEAT is a tax on
certain payments from a U.S. company to a related foreign party, which can include premium payments
for reinsurance. In response to the new tax, many U.S. insurance companies terminated these
intracompany reinsurance contracts. As a result, premiums paid by U.S. insurers to foreign insurers in
the first three quarters of 2018 were $73.9 billion, down from $98.4 billion for the same period in 2017
(table 3). Similarly, insurance services imports in the first three quarters of 2018 were $28.8 billion,
down from $38.2 billion for the same period in 2017.
For more information on the estimation methods used to compile insurance services, see the insurance
section in “U.S. International Economic Accounts: Concepts and Methods.”
Capital Account (table 1)
Capital transfer receipts were $0.6 billion in the third quarter. The transactions reflected receipts from
foreign insurance companies for losses resulting from Hurricane Florence. For information on
transactions associated with hurricanes and other disasters, see “How do losses recovered from foreign
insurance companies following natural or man-made disasters affect foreign transactions, the current
account balance, and net lending or net borrowing?”
Financial Account (tables 1, 6, 7, and 8)
Net U.S. borrowing measured by financial-account transactions was $31.3 billion in the third quarter, a
decrease from net borrowing of $153.7 billion in the second quarter.
Net U.S. acquisition of financial assets excluding financial derivatives was $132.7 billion in the third
quarter following net U.S. liquidation of $199.9 billion in the second quarter.
Net U.S. acquisition of direct investment assets was $76.8 billion following net U.S. withdrawal
of $68.1 billion in the second quarter. The net withdrawal of direct investment assets in the first
half of 2018 reflected U.S. parent repatriation of previously reinvested earnings in response to
the TCJA. For more information, see the box “Effects of the 2017 Tax Cuts and Jobs Act on
Components of the International Transactions Accounts.”
Net U.S. liquidation of other investment assets decreased $104.1 billion to $16.6 billion. The
decrease in the net liquidation mostly reflected a decrease in the net foreign repayment of
Net U.S. purchases of portfolio investment assets were $72.6 billion following net U.S. sales of
$14.3 billion in the second quarter. This change mostly reflected net U.S. purchases of foreign
equity and investment fund shares following net sales in the second quarter.
Net U.S. incurrence of liabilities excluding financial derivatives was $151.7 billion in the third quarter
following net U.S. repayment of $63.3 billion in the second quarter.
Net U.S. incurrence of other investment liabilities was $16.9 billion following net U.S. repayment
of $100.4 billion in the second quarter. This change primarily reflected net foreign provision of
loans following net U.S. repayment in the second quarter.
Net U.S. incurrence of direct investment liabilities increased $105.8 billion to $122.3 billion,
mostly reflecting an increase in equity liabilities.
Net U.S. incurrence of portfolio investment liabilities decreased $8.1 billion to $12.5 billion. This
decrease reflected largely offsetting transactions in U.S. equity and debt liabilities.
Transactions in financial derivatives other than reserves reflected third-quarter net borrowing of $12.3
billion, a $4.7 billion decrease in net borrowing from the second quarter.
Statistical Discrepancy (table 1)
The statistical discrepancy was $93.0 billion in the third quarter following a statistical discrepancy of
−$52.4 billion in the second quarter.
Updates to Second Quarter 2018 International Transactions Accounts Aggregates
Billions of dollars, seasonally adjusted
Net lending (+)/borrowing (−) from financial-account transactions
Next release: March 21, 2019 at 8:30 A.M. EDT
U.S. International Transactions, Fourth Quarter and Year 2018
U.S. International Transactions Release Dates in 2019
Fourth Quarter and Year 2018
First Quarter 2019 and Annual Update
Second Quarter 2019
Third Quarter 2019
The capital account consists of capital transfers between
residents and nonresidents and the cross-border
acquisition and disposal of nonproduced nonfinancial
assets. Capital transfers include debt forgiveness and
certain disaster-related nonlife insurance claims.
Nonproduced nonfinancial assets include natural resources
and contracts, leases, and licenses. Capital-account
transactions are distinguished from current-account
transactions in that capital-account transactions result in a
change in the assets of one or both parties to the
transaction without affecting the income or savings of
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Historical time series for these estimates can be
accessed in BEA’s interactive data application.
Access BEA data by registering for BEA’s data
application programming interface (API).
For more on BEA’s statistics, see our monthly
online journal, the Survey of Current Business.
BEA's news release schedule.
More information on these international
transactions statistics will be provided next
month in the Survey of Current Business.
More information on the international
transactions accounts (ITAs) and a description of
the estimation methods used to compile them is
provided in U.S. International Economic
Accounts: Concepts and Methods.
The financial account consists of transactions between U.S.
residents and nonresidents for direct investment, portfolio
investment, other investment, reserves, and financial
derivatives other than reserves.
Direct investment is a category of cross-border investment
associated with a resident in one economy having control
or a significant degree of influence on the management of
an enterprise resident in another economy. Ownership or
control of 10 percent or more of the enterprise’s voting
securities is the threshold for separating direct investment
from other types of investment. Direct-investment
transactions in the financial account include transactions in
equity (including reinvestment of earnings) and debt
The current account consists of transactions between U.S.
residents and nonresidents in goods, services, primary
income, and secondary income.
Goods are physical items with ownership rights that can be
exchanged among institutional units through transactions.
Portfolio investment transactions consist of cross-border
transactions involving equity and investment fund shares
and debt securities, excluding those included in direct
investment or reserve assets.
Services transactions consist of transactions arising from
productive activities that change the condition of the
consumer or that facilitate the exchange of products and
Other investment is a residual category that includes crossborder financial instruments other than those included in
direct investment, portfolio investment, financial
derivatives, and reserve assets. Other-investment
transactions consist of transactions in currency and
deposits, loans, insurance technical reserves, trade credit
and advances, and, for liabilities, special drawing rights
Primary income transactions include investment income
and compensation of employees. Investment income is the
return on holdings of financial assets and includes direct
investment income, portfolio investment income, other
investment income, and income on reserve assets.
Compensation of employees is income for the contribution
of labor inputs to the production process.
Reserve assets are those external assets that are readily
available to and controlled by monetary authorities for
meeting balance of payments financing needs, for
intervention in exchange markets to affect the currency
exchange rate, and for other related purposes such as
maintaining confidence in the currency and the economy
and serving as a basis for foreign borrowing. The major
published components are monetary gold, International
Monetary Fund (IMF) special drawing rights (SDRs), reserve
position in the IMF, and other reserve assets.
Secondary income consists of current transfers between
residents and nonresidents. Unlike an exchange, a transfer
is a transaction in which a good, service, or asset is provided
without a corresponding return of economic value.
Secondary income receipts and payments include U.S.
government and private transfers, such as U.S. government
grants and pensions, fines and penalties, withholding taxes,
personal transfers (remittances), insurance-related
transfers, and other current transfers.
Financial derivatives other than reserves consist of
financial contracts that are linked to underlying financial
instruments, commodities, or indicators. Transactions in
financial derivatives consist of U.S. cash receipts and
payments arising from the sale, purchase, periodic
settlement, or final settlement of financial derivatives
contracts. Transactions in financial derivatives are only
available as a net value equal to transactions for assets less
transactions for liabilities. A positive value represents net
cash payments by U.S. residents to foreign residents from
settlements of derivatives contracts (net lending) and a
negative value represents net U.S. cash receipts (net
Release and update cycle
Preliminary quarterly statistics for the ITAs are released in
March, June, September, and December approximately 80
days after the end of the reference quarter. These statistics
are updated the following quarter to incorporate new
source data. Quarterly statistics are open for revision for at
least the prior three years in annual updates released in
June. Preliminary annual statistics are released in March
along with statistics for the fourth quarter of the previous
year. These annual statistics are open for revision for at
least the prior three years in subsequent annual updates.
The statistical discrepancy is the difference between net
acquisition of assets and net incurrence of liabilities in the
financial account (including financial derivatives) less the
difference between total credits and total debits recorded
in the current and capital accounts. The statistical
discrepancy can also be calculated as the difference
between net lending (borrowing) measured from financialaccount transactions and net lending (borrowing)
measured from current- and capital-account transactions.
The ITAs constitute one part of a broader set of U.S.
international economic accounts that, taken together,
provide a comprehensive, integrated, and detailed picture
of U.S. international economic activities.
The international investment position (IIP) accounts are
released quarterly. Financial transactions that are reported
in the ITAs are one type of change in position recorded in
the IIP accounts.
The current-account balance is the difference between
credits (exports and income receipts) and debits (imports
and income payments) in the current account. The balance
is a net measure of current-account transactions between
the United States and the rest of the world. A positive
balance indicates a current-account surplus. A negative
balance indicates a current-account deficit.
Statistics on direct investment and multinational
enterprises (MNEs) include annual statistics on the
activities of MNEs, detailed annual and quarterly statistics
on direct investment, and annual statistics on new
investment in the United States.
Statistics on international services, released annually,
include detailed annual information on trade in services and
on services supplied through the channel of direct
investment by affiliates of MNEs.
Net lending (borrowing) measures the balance of funds
supplied to the rest of the world. Net lending means that,
in net terms, the U.S. economy supplies funds to the rest of
the world. Net borrowing means the opposite. Net lending
(borrowing) can be measured by current- and capitalaccount transactions or by financial-account transactions.
Conceptually, the two measures are equal. In practice, the
two measures differ by the statistical discrepancy.
U.S. international trade in goods and services, released by
BEA and the U.S. Census Bureau, provides monthly statistics
on trade in goods and services.
List of News Release Tables
Table 1. U.S. International Transactions
Table 2. U.S. International Trade in Goods
Table 3. U.S. International Trade in Services
Table 4. U.S. International Transactions in Primary Income
Table 5. U.S. International Transactions in Secondary Income
Table 6. U.S. International Financial Transactions for Direct Investment
Table 7. U.S. International Financial Transactions for Portfolio Investment
Table 8. U.S. International Financial Transactions for Other Investment
December 19, 2018
Table 1. U.S. International Transactions–Contin ...
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