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Corporate behaviour and the balance of payments

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  • Leslie Hull

    (Reserve Bank of New Zealand)

Abstract

Balance of payments data are sometimes used to try to predict currency or financial crises. A high current account deficit relative to GDP, a large proportion of external debt relative to equity flows, and a large proportion of investment portfolio flows versus longer-term debt or direct investment have been considered "warning signals" of potential impending financial crises in some economies. Using balance of payments data for these purposes suggests the need for a careful understanding of what underlies the data. This article aims to further our understanding of some of the elements in New Zealand's balance of payments current account and financial account data so that we can make more insightful interpretations of developments in the balance of payments. It provides several examples of how corporate financing choices could affect measured flows. Because of legal arrangements, certain corporate transactions may result in the overstatement of one type of capital flow relative to another in economic terms. Therefore, analysis of capital flows at face value could be misleading when interpreting the flows from a macro-financial stability perspective.

Suggested Citation

  • Leslie Hull, 2002. "Corporate behaviour and the balance of payments," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 65, December.
    • Handle: RePEc:nzb:nzbbul:december2002:3
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    File URL: http://www.rbnz.govt.nz/-/media/ReserveBank/Files/Publications/Bulletins/2002/2002dec65-4hull.pdf
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    References listed on IDEAS

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    1. Sean Collins & Francisco Nadal De Simone & David Hargreaves, 1998. "The current account balance: an analysis of the issues," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 61, March.
    2. Leslie Hull, 2002. "Foreign-owned banks: Implications for New Zealand's financial stability," Reserve Bank of New Zealand Discussion Paper Series DP2002/05, Reserve Bank of New Zealand.
    3. Mark A. Carlson & Leonardo Hernandez, 2002. "Determinants and repercussions of the composition of capital inflows," International Finance Discussion Papers 717, Board of Governors of the Federal Reserve System (U.S.).
    4. Dani Rodrik & Andres Velasco, 1999. "Short-Term Capital Flows," NBER Working Papers 7364, National Bureau of Economic Research, Inc.
    5. Robert St Clair & Christine Tether & Bruce White, 1998. "The intermediation of international capital flows," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 61, June.
    6. Christian Hawkesby, 2000. "Maintaining financial system stability: the role of macro-prudential indicators," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 63, June.
    7. Mr. Mark S. Carlson & Mr. Leonardo Hernández, 2002. "Determinants and Repercussions of the Composition of Capital Inflows," IMF Working Papers 2002/086, International Monetary Fund.
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    Cited by:

    1. Khoon Goh, 2005. "Developments in the New Zealand corporate sector," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 68, June.

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