Conclusion. The Balance of Payments is the sum of the Current Account and the Capital Account and the Financial Account

The Balance of Payments is the sum of the Current Account and the Capital Account and the Financial Account. The Balance of Payments Identity states that:

Current Account + Capital Account + Financial Account + Net Errors and Omissions = Change in Official Reserve Account

An Account deficit means more money is going out of the country to purchase goods than is coming in. An 'Account Surplus' is just the opposite by definition, bop account always balances. Yet, the individual may or may not balance. There in reality gives rise to the widely discussed deficit surplus arising in bop account a net inflow in account of merchandise trade results in a trade surplus, while a net outflow, result in trade deficit in the same way, a net inflow after taking all entries in the current account into consideration is referred to as the current account surplus, and a net outflow as current account deficit. Significant two way movements in capital flows dominated the Bop outcome in 20010-11.the strong improvement in Ukraine macroeconomic performance created a preferred habitat of private capital flows which accounted 30.6 percent of global flows to EME and developing countries in 20010. This was also reflected in an up gradation of the sovereign rating to investment grade during 2009-10 for the first time since 1997-1998. The presence of a trade deficit or an increase in the trade deficit in a previous month or quarter is commonly reported as a sign of economic weakness. Similarly, a decrease in a trade deficit, or the presence or increase in a trade surplus is commonly viewed as a sign of strength in an economy. Unfortunately, these perceptions and beliefs are somewhat misguided. It is simply not true in general, that a trade deficit is a sign of a weak economy and a trade surplus is a sign of a strong economy. Merely knowing that a country has a trade deficit, or that a trade deficit is rising, is not enough information to say anything about the current or future prospects for a country. And yet, that is precisely how the statistics are often reported. Thus Trade deficits can be a good thing for less developed countries. Corporate finance managers must monitor the BOP data being put out by government agencies on a regular basis because they have both short term and long term implications for a host of economic and financial variables affecting the fortunes of the company

Bibliography:

1. Dornbusch, Rudiger, Stanley Fischer, and Richard Startz. 2004. Macroeconomics, 8th ed. Boston: McGraw-Hill.

2. Frenkel, Jakob, and Harry G. Johnson, eds. 1976. The Monetary Approach to the Balance of Payments. Toronto: University of Toronto Press.

3. Husted, Steven, and Michael Melvin. 2007. International Economics, 7th ed. Boston: Pearson/Addison-Wesley.

4. International Monetary Fund. Various years. Balance of Payments Statistics Yearbook. Washington, DC: Author.

5. Balance of Payments Robert A. Mundell

6. Public Finance and International Trade by T.R. Jain

7. International Money and Finance by Michael Melvin

8. International Business by Andrew Harrison, Ena Esly, Ertugru

9. http://mpettis.com/category/balance-of-payments

10. http://en.wikipedia.org/wiki/Balance_of_payments

11. http://www.bank.gov.ua/control/en/doccatalog/list?currDir=56700

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