Glossary: M07 — Capital Flows and the FX Market
| Term | Definition |
|---|
| Balance of payments (BOP) | Record of all economic transactions between residents and non-residents |
| Current account | BOP component: trade balance, income, transfers |
| Capital account | BOP component: capital transfers, non-produced non-financial assets |
| Financial account | BOP component: direct investment, portfolio investment, reserves |
| Trade balance | Exports minus imports of goods and services |
| Foreign direct investment (FDI) | Investment establishing lasting interest in foreign enterprise (>10% ownership) |
| Portfolio investment | Investment in foreign securities without controlling interest |
| Fixed exchange rate | Rate pegged to another currency; maintained by central bank intervention |
| Floating exchange rate | Rate determined by market supply and demand |
| Managed float | Primarily market-determined rate with occasional central bank intervention |
| Currency board | Fixed exchange rate backed by 100% foreign reserves |