Define accomodating items


05-Sep-2019 14:55

BOP is in deficit when autonomous receipts are less than autonomous payments.

Accommodating items refer to the transactions that are undertaken to cover deficit or surplus in autonomous transactions, i.e.

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Autonomous transactions take place on both current and capital accounts. On the current account, merchandise exports and imports of goods are autonomous transactions. On the capital account, receipts and repayments of long-term loans by private individuals are autonomous transactions.

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For example, if there is a current account deficit in the BOP, then this deficit is settled by capital inflow from abroad.

They have nothing to do with foreign exchange payments.

Since such transactions are independent of the state of country’s balance of payment, i.e., irrespective of whether BOP is favourable or unfavourable, they are, therefore, called autonomous items.

These items are generally called ‘above the line items’ in BOP Again, it is autonomous transactions which make deficit or surplus in BOP.

BOP is in deficit if the autonomous receipts are less than autonomous payments.

The transactions recorded in the balance of payments accounts can be categorized as ‘Autonomous Transactions’ and ‘Accommodating Transactions’.