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Current account, Capital account and Euro Credit Market

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Please, answer the questions below.
1. What is the current account generally composed of?
2. What is the capital account generally composed of?
3. Is a current account deficit something to worry about?
4. If a government wants to correct a current account deficit, why can't it simply enforce restrictions on imports?
5. With regard to Eurocredit loans, who are the borrowers?
6. Why would a bank desire to participate in syndicated Euro­credit loans?
7. What is LIBOR and how is it used in the Eurocredit market?

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Running Head: GLOBAL FINANCE

Global Finance: Current account, Capital account and Euro Credit Market

1.
The current account balance consists of the following items:
(1) the balance of trade,
(2) payments from international tourism,
(3) the net amount of payments of interest to foreign investors and from foreign investment, and
(4) private gifts and grants.
2.
The capital account comprises of all the capital investments made between countries, counting both the purchase of securities with maturities greater than one year and direct foreign investment.
3.
The answer to this question is not perfect and it is not necessary that a current account deficit is harmful for a nation but it can be said that a current account deficit is a matter of worry because a negative current account is considered to reveal the lost jobs in a nation, which is not a favorable sign. Still, the foreign importing reflects strong competition from foreign producers, which may help in keeping the prices (inflation) low.
4.
Current account deficit means that a country is consuming more than its producing and ...

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Ashish Sharma, MBA (IP)
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  • MBA (IP), International Center for Internationa Business
  • BBA, University of Rajasthan
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