Now a day, role of foreign trade has increased many folds. At present no country can remain in isolation from rest of the world. Every country is exporting / importing good, services and making different capital transactions with other countries. In one transaction, a country may receive foreign exchange and in other transactions, it may be paying foreign exchange to know the net position, systematic record of these monetary transactions is made. This systematic record is known as balance of payments.
DEFINITION:-
Balance of payments refers to recording of all economic transactions of a given country with rest of the world. Each country has got to enter into economic transactions with other countries of the world. As a result of such transactions, it receives payments and makes payments to other countries .balance of payments is a statement of accounts of these receipts and payments.
In the words of Kindleberger, “The balance of payment of a country is a systematic record of all economic transaction between its residents and residents of foreign counties.”
In the word of Benham, “Balance of payments of a county is a record of the monetary transactions over a period with the rest of the world.”
PRINCIPAL AND CONCEPTUAL FRAMEWORK
Balance of payment is concerned with economic transactions. Five basic types of economic transactions are these:-
1- Purchase and sales of goods and services against in terms of money.
2- Barter, i.e. the interchange of goods and services against other goods and services.
3- The interchange of financial items against other financial items e.g. sales of securities for money, or the repayment of commercial debts in money.
4- The provisions or acqu ...