Changes in the BOP may predict the imposition or removal of foreign exchange controls.

Question

Quizplus · Accepted Answer

Balance of payments (BOP) measures the economic transactions between a country and the rest of the world. If a country faces a deficit in its BOP, it may impose foreign exchange controls to limit the outflow of its currency. Similarly, if a country experiences a surplus in its BOP, it may remove foreign exchange controls to encourage the inflow of capital. Therefore, changes in the BOP may predict the imposition or removal of foreign exchange controls.

Changes in the BOP May Predict the Imposition or Removal