The balance of payments as an instrument for analyzing the Mexican economy

Abstract

Residents of a country carry out transactions with residents of other countries, whether they are exchanges of goods and services or of a financial nature. These economic operations are systematically recorded in the balance of payments. The balance of payments is first and foremost a statistical record, in an accounting format, of the economic transactions of a country with the rest of the world. The balance of payments should not be considered as a balance sheet, nor as an exclusive record of international payments.

Among the objectives of macroeconomic stabilization policies, the achievement of balance of payments equilibrium, price level stability and full employment are contemplated. From a dichotomous perspective, the achievement of internal equilibrium is achieved through control of the level and rate of price growth, as well as through the reduction of unemployment, while external equilibrium is related to the balance of payments equilibrium. Although price stability and full employment are desirable objectives and are therefore intuitively identifiable, in the case of balance of payments equilibrium, we cannot say the same, since a balance of payments equilibrium situation can have either a positive or negative meaning, depending on how it was achieved.