0
You visited us 0 times! Enjoying our articles? Unlock Full Access!
Question

What are official reserve transactions? Explain their importance in the balance of payments.

Solution
Verified by Toppr

Official reserve transactions refer to transactions by the central bank that cause changes in its official, reserves of foreign exchange. Such transactions take place when a country withdraws from its stock of foreign exchange reserves to finance deficit in its overall balance of payments (BOP). A country with surplus in its overall BOP leads to rise in foreign exchange reserves.
Official reserve transactions are very important as they help to bring a balance in the country's overall balance of payments. So, such transactions act as accommodating Item in BOP.

Was this answer helpful?
10
Similar Questions
Q1
What are official reserve transactions? Explain their importance in the balance of payments.
View Solution
Q2

What is meant by 'official reserve transactions'? Discuss their importance in the Balance of Payments.

View Solution
Q3
Q.Consider the following statements with reference to Balance of Payments: Which of the above given statements is/are incorrect?

  1. 1 only

  2. 2 only

  3. Both 1 and 2

  4. Neither 1 nor 2
View Solution
Q4
Official reserve transactions refer to ___________.
View Solution
Q5
Foreign exchange transactions which are independent of other transactions in the Balance of Payments Account are called _________________.
View Solution