A User's Guide to the Bop and Iip

Abstract

This note presents a short description of the balance of payments (BOP) and international investment position (IIP) presentations. It refers to data for South Africa, but given that there are worldwide standards for countries that report both BOP and IIP, it should provide guidance for understanding the data of just about any country.

Excerpt

UVA-BP-0523

Rev. Feb. 8, 2017

A User's Guide to the BOP and IIP

This note presents a short description of the balance of payments (BOP) and international investment position (IIP) presentations. It refers to data for South Africa, but given that there are worldwide standards for countries that report both BOP and IIP, it should provide guidance for understanding the data of just about any country. Data for over 100 countries are available in the International Monetary Fund (IMF) annual Balance of Payments Statistics Yearbook.

The BOP accounts record international transactions (flows within a period of time), whereas the IIP records financial positions (stocks accumulated over time, reported as year-end values). In theory, there should be a straightforward link between the two. The BOP concerns the current account (trade in goods and services, plus income streams from international positions) and the transactions that finance it. The financing transactions (e.g., U.S. residents' purchases of German equities) result in positions in equities, debt, and other vehicles, and those positions are what make up the IIP. The position (or IIP) from year to year should evolve according to flows recorded in the BOP plus valuation changes (due to price and exchange-rate movements), a point returned to at the end of this note.

BOP Terms and Conventions

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Keywords: international investment position, balance of payments