Could you please clarify the breakdown of the BoP accounts with regards to Revision booklet 4, multiple choice question 36? The question asks what shouldn't be in the current account. The CMP includes migrant remittances in the capital account (chapter 16, section 1.3, page 6), which was the basis for my answer A. The solutions show the answer as D - the purchase of foreign shares by a domestic pension fund, which I agree should be financial account flow though unclear on why A is not a correct answer. Thanks in advance!
Hi, The capital account includes money brought into the country by migrants. This is the money / savings brought into a country by immigrants when they (permanently) move into a country. (Equally, the money moved out of the country when people emigrate would be recorded here as a negative entry.) In contrast, migrant remittances refers to the transfer of money by workers who are currently (and temporarily) working abroad. So, if the father of a UK family is currently working on a project in the US and sends some money home each month, that is included (as a positive entry) within the net income flows from abroad item within the current account. Presumably, distinguishing between the two may sometimes be difficult in practice. However, it should be clear in the exam, which is meant.
