Essays on Capital Account

Describe portfolio investments and FDI. How do they differ and why is it important to distinguish between them?

Foreign portfolio investments (FPI) and foreign direct investments (FDI) are two commonly used and at times easily confused phrases. Foreign portfolio investments refer to investments in financial assets in a foreign country. These financial instruments include instruments like stocks and bonds. Investors love to invest in such instruments in order to diversify and hedge their portfolios. For example, Brexit has caused European banks to shed their values significantly and some international fund managers have already started purchasing these banks to diversify their portfolio and take advantage of attractive stock valuations. On the other hand, foreign direct investment refers to ...

Many economists and international financial consultants suggest that capital account liberalization is an important strategy for developing countries in order to spur economic growth. Specifically, the International Monetary Fund once called for the emerging markets and other developing countries to tap into the possibilities of capital account liberalization (Gallagher & Antonion, 2013). The positive impact to developing countries of heightened access of capital flows resulted in the less attention on the risk associated with it (Takagi, 2005). However, recent pronouncements from leading financial organizations suggests that while there are benefits derived from capital account liberalization, there are disadvantages associated from ...

Introduction

Governments and nonprofit organizations just like the commercial entities must prepare financial statements, but unlike the commercial entities whose accounting is for measuring profitability, the governments’ and nonprofit organizations’ accounting is for accountability (City of Cambridge Participatory Budgeting, 2016). The nonprofit and government agencies apply an accounting system known as fund accounting, where a fund is made up of several accounts each set apart for a particular purpose in agreement with law and regulations. Unlike the commercial entities which only have a single account called the general ledger for determination of profits, nonprofit and government agencies can have several ...