Define the term ‘invisibles’ in the Balance of Payments account. Give two examples of invisibles.

Define the term ‘invisibles’ in the Balance of Payments account : Invisibles in the Balance of Payments account refer to those international transactions that do not involve the physical movement of goods and services across borders, but rather involve the exchange of economic value between residents of one country and residents of other countries. Invisibles are also known as “invisible trade” or “non-merchandise trade.”

Define the term ‘invisibles’ in the Balance of Payments account

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Two examples of invisibles are:

  1. Services Trade: This category includes transactions related to services such as tourism, transportation, financial services, consulting, education, and healthcare. For instance, when a foreign tourist visits a country and spends money on accommodation, dining, and entertainment, it contributes to the services trade component of invisibles.
  2. Income Receipts and Payments: This component involves income earned from foreign investments and income paid to foreign investors. For example, if a resident of one country owns shares in a foreign company and receives dividends, interest, or profits from that investment, it contributes to the income receipts portion of invisibles. Conversely, when a company in one country pays interest or dividends to foreign investors, it contributes to the income payments portion of invisibles.

Invisibles play a significant role in the Balance of Payments because they reflect the broader economic interactions between countries beyond the exchange of physical goods. They have implications for a country’s international financial position and its overall economic relationship with the rest of the world. Define the term ‘invisibles’ in the Balance of Payments account

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