Question:
“Accommodating transactions are undertaken to maintain stability in the Balance of Payments Account.”
Justify the given statement with a valid explanation.
“Accommodating transactions are undertaken to maintain stability in the Balance of Payments Account.”
Justify the given statement with a valid explanation.
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Accommodating transactions aim to stabilize the Balance of Payments by addressing deficits through government or central bank interventions.
Updated On: Jan 31, 2025
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Solution and Explanation
Accommodating transactions in the Balance of Payments (BoP) are non-market-driven transactions undertaken by the government or central bank to correct imbalances in the BoP.
These transactions are used to bridge gaps when there is a deficit in the current account or capital account.
Example: Borrowing from international organizations like the IMF or drawing down foreign exchange reserves to address a deficit.
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