I am a little confused by question 19.16 in chapter 19. Why is trade credit treated as positive in the current account when no actual money has been exchanged. In my opinion this is the same as somebody making a loan where there is a negative entry in the capital account at the time of the loan and then a positive amount in the capital amount at the time of repayment. In the case of trade credit we seem to be adding a positive amount to the current account and a negative amount to the capital amount at the time of trade credit (net effect being zero) and then at the time of payment another positive amount is added to the capital account. Is this not double counting?
If we don't have a positive in the current account at the time that the export is made, then we won't be allowing for the fact that we have actually sold something. I suppose that the example is really stating what will go through the balance of payments in respect of the export and the trade credit associated with it.
