When a country has a deficit in the balance of payments, how to use fiscal policy and monetary polic

Policies to make up for the balance of payments deficit can be divided into two categories: funding and adjustment.

1. Funding policy.

The subsidy policy consists of a policy of reducing foreign exchange reserves and international borrowing. The subsidy policy is only suitable for short-term balance-of-payments deficits. The balance of payments deficit is affected by the money supply and interest rates, which are determined by the base money, which is made up of domestic credit levels and foreign exchange reserves.

When the subsidy policy is adopted, on the one hand, the financial authorities sell foreign currency and buy local currency, which reduces foreign exchange reserves and causes a decrease in the base currency. On the other hand, we should try our best to buy local currency assets and put local currencies in order to raise the level of domestic credit and cause an increase in base currency. In this way, in the process of covering the deficit, the decrease and increase of the base money compensate for each other. In short, the subsidy policy balances the increase or decrease of the base money through the compensatory process of increasing the level of domestic credit, so that the money supply and interest rates remain at their original levels, without changing the environment in which the deficit occurs.

As such, it is not advocated by the International Monetary Organization. However, with the capacity of foreign exchange reserves and the possibility of international borrowing, the implementation of the subsidy policy is simpler, and the cost and resistance are less.

2. Adjust policies.

With regard to long-term fundamental balance-of-payments deficits, it is generally necessary to jointly adopt subsidy policies and adjustment policies. There are three components of adjustment policy: expenditure reduction policy (including contractionary fiscal policy, contractionary monetary policy), expenditure transfer policy (including depreciation policy) and direct control policy (including tariffs, caps, multiple exchange rates, subsidies, etc.).

The deficit can be compensated for by the policy of falling spending. By reducing domestic income and total expenditure on domestic and non-domestic goods, it first reduces import demand, and secondly, it reduces domestic demand to increase domestic and foreign demand for domestic products. The key to the success of the policy of declining expenditures lies in the use of surplus resources resulting from the reduction of aggregate domestic expenditure to meet demand for domestic excess output.

The expenditure transfer policy is to increase the demand for domestic and foreign products by changing the price of the corresponding domestic and foreign outputs and reducing the demand for imports. Under conditions of full employment, if resources are not controlled to meet this excess demand, the policy of expenditure transfer will only lead to inflation.

How to use finance to regulate.

One policy alone often does not solve the problem, so it is often a combination of policies.

The balance of payments, also known as the external balance, refers to the fact that a country's net balance of payments, i.e., the difference between net exports and net capital outflows, is zero. Namely: net balance of payments, net exports, net capital outflows; or bp nx f.

A measure of the payment of transactions made by one country against all other countries over a specific period of time. If the inflow of its currency is greater than the outflow, the balance of payments is positive. These transactions arise under the current account, financial account or capital account.

The balance of payments is considered another economic indicator of a country's relevant value, including ** balance, foreign investment and foreign investment.

1. Marshall-Lerner adjustment: Only when the absolute value of the sum of the elasticity of a country's import demand and the elasticity of demand for going abroad is greater than 1, can currency depreciation improve the balance of payments.

2. J curve effect: because the effect of the exchange rate on the balance of payments must be carried out through price changes, but there is a time lag between this, in this way, the improvement of the balance of payments by exchange rate changes is first manifested in the opposite direction, and only after a considerable period of time is it manifested in the positive direction.

3. The effect of exchange rate changes is also affected by the psychological effect of foreign exchange.

A balance of payments deficit, also known as a balance of payments deficit, is when a country spends more than it earns in the balance of payments. The balance of payments deficit will lead to a decrease in the supply of foreign exchange in the domestic foreign exchange market (China's supply of foreign currency) and an increase in demand (China's demand for foreign currency), which will make the exchange rate of foreign exchange **, the exchange rate of the local currency**. If the country takes steps to intervene, i.e., sell foreign exchange and buy the local currency, it will not have enough foreign exchange reserves in hand, which in turn will further lead to the depreciation of the local currency.

The intervention will directly lead to a decrease in the amount of the national currency, which in turn will lead to an increase in the level of domestic interest rates, leading to a decline in the economy and an increase in unemployment.

When a country has a sustained deficit, a single policy generally does not play a big role, and a single policy often does not solve the problem, so it is often a combination of policies. Of course, specific problems need to be analyzed on a case-by-case basis.

When a country decides to intervene in the foreign exchange market, the local currency is used to finance the deficit.

These countries may be implementing contractionary monetary policy. They sell international reserves and make base money.

decreases, resulting in a decrease in the money supply.

1. Balance of payments deficit.

For monetarists, deficits are a monetary phenomenon that occurs when the increase in demand for money is less than the increase in the level of domestic credit. Under the original fixed exchange rate system, excessive demand for money should be carried out through foreign exchange surpluses.

make up, while excessive domestic credit creation will reflect the deficit.

structuralists believe that developing countries.

There are generally three reasons for the balance of payments deficit. One is because of the unfavorable factors of export products, the main export commodities of developing countries are primary products, and the elasticity of income demand is very low, and its elasticity is also very low. In recent years, the conditions in developing countries have been deteriorating.

The second is that the sales market is not good. Market economy.

The slow growth of primary products has constrained the growth of exports of primary products to a certain extent. The third is that the inefficiency of production in developing countries has led to excessive export costs, which in turn have affected export profits.

In general, the balance of payments deficit can be covered by both policies of financing and adjustment.

International borrowing policy and reduction of foreign exchange reserves.

A subsidy policy is formed, but it can only be applied to short-term balance-of-payments deficits. The balance of payments deficit is affected by the supply of money and interest rates, which in turn are determined by the base currency, which is composed of the level of domestic credit and foreign exchange reserves. Funding policy is a process of compensating for the increase in the level of domestic credit, which balances the increase or decrease of the base money, so that the money supply and interest rates can be maintained at the original level, and the environment in which the deficit is generated does not change.

Therefore, it is often not organized by the International Monetary Organization.

advocated. Of course, under the conditions of the ability to use foreign exchange reserves and the possibility of international borrowing, the implementation of the subsidy policy will be simple and easy, and the cost and resistance will be smaller.

The adjustment policy consists of a policy of declining expenditures, a policy of shifting expenditures and a policy of direct control. The former can make up for its deficit at a low cost, mainly by reducing domestic income and total expenditure on first-class products and non-first-class products, first reducing the demand for imports, and then reducing domestic and foreign demand for domestic products. The expenditure transfer policy is to change the price of the corresponding domestic and foreign output, reduce the demand for imports, and thus increase the demand for domestic and foreign products.

If, in the case of insufficient employment, the decline in domestic output** leads to excess demand for exports, import substitution can be satisfied; However, under conditions of full employment, if resources are not controlled to meet this excess demand, the policy of expenditure transfer will only lead to inflation.

Answer] When there is a deficit in the balance of payments :d, the monetary authority can reduce foreign exchange reserves or temporarily borrow from abroad, and sell foreign exchange in the foreign exchange market to make up for the gap in foreign exchange supply; Monetary authorities can adopt a tight monetary and fiscal policy; It is also possible to take measures to depreciate the local currency stool. Therefore, Zao Xiangshan D.

Answer]: cThe macroeconomic policies for the balance of payments deficit in the Ming Festival include: tight fiscal policy; Tighten Duan's monetary policy; Policies such as the legal depreciation or depreciation of the local currency.

Answer]: A balance of payments is the most important factor affecting exchange rate movements. When a country has a large balance of payments deficit, it means that its foreign exchange income is less than foreign exchange expenditure, and the demand for foreign exchange is greater than the supply of foreign exchange, which will cause the foreign exchange exchange rate to dry up and the local currency to lose its value to foreign countries.

On the contrary, if a country has a surplus in the balance of payments, its exports increase, its foreign exchange earnings increase, imports decrease, foreign exchange payments decrease, and the supply of foreign exchange exceeds expenditure, resulting in the appreciation of the local currency and the foreign exchange rate.