balance of payments

the difference between a nation's total payments to foreign countries, including movements of capital and gold, investments, tourist spending, etc., and its total receipts from foreign countries.

[1835-45]

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Systematic record of all economic transactions during a given period between residents (including the government) of one country and residents (including the governments) of other countries.

The transactions are presented in the form of double-entry bookkeeping. The U.S. balance of payments, for example, records the various ways in which dollars are made available to foreigners through U.S. imports, U.S. tourist spending abroad, foreign lending, and so on. These expenditures are shown on the debit side of the balance. The credit side shows the various uses to which foreigners put their dollars, including paying for U.S. exports, servicing debts to the U.S., and the like. Foreign countries may acquire more dollars than they need to spend on U.S. goods and services and may hold the surplus or purchase gold or securities; or they may have fewer dollars than they need to purchase U.S. goods and services, and may acquire additional dollars by transferring gold, selling holdings in the U.S., and so on. Certain forms of transferring funds (e.g., large outflows of gold) are less desirable as a way of settling foreign debts than others (e.g., transfers of currency acquired through international trade). The International Monetary Fund helps address problems relating to balance of payments. See also balance of trade.

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▪ economics

      systematic record of all economic transactions between residents of one country and residents of other countries (including the governments). The transactions are presented in the form of double-entry bookkeeping.

      There can be no surplus or deficit in a country's balance of payments as a whole (as distinguished from its balance of trade) because every payment will have an offsetting receipt.

      The balance of payments of Japan, for example, records the various ways in which yen are made available to foreigners through Japanese purchases of foreign goods, expenditures of Japanese tourists abroad, donations, loans, etc. These expenditures are shown on the debit side of the balance. The receipts side indicates the various uses to which foreigners put their yen, such as purchases of Japanese goods, interest on Japanese loans, etc. If foreigners do not spend all the yen made available to them, the balance of payments will show on the credit side an increase of foreign-held yen balances, foreign purchases of Japanese securities, gold exports from Japan, or some similar item. See also international payment and exchange.

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