Autonomous and accommodating transaction

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Because of government financing, official settlements are seen as accommodating items to keep the BOP identity. may borrow from abroad or make withdrawals from foreign exchange reserves.

Accommodating transactions are compensating capital transactions which are meant to correct the disequilibrium in autonomous items of balance of payments.For example, if there is a current account deficit in the BOP, then this deficit is settled by capital inflow from abroad.The sources used to meet a deficit in BOP, are: (i) Foreign exchange reserves; (ii) Borrowings from IMF or foreign monetary authorities.Suppose a foreign exporter buys an advertising agency in the country at the cost of Rs.80 crore for expanding the market for his products.

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