Balance of payments: France

Résumé du document

"The balance of payments is a measure of the payments that flow between two specific countries. It is used to analyze and summarize the international economic transactions of that country during a specific time period."(http://en.wikipedia.org/wiki/Balance_of_payments). It is an important indicator for the conduct of economic and monetary policy. It is divided in three main categories: the current account, the financial account and the capital account. This is applicable to all countries and is an interesting topic that has been chosen for our case study. Our case study is more specific to the balance of payments in France. A couple of question that will be addressed in the case study are: What are the elements that can lead to imbalances in the balance of payments? What were the external events that could have influenced the French balance of payments? How does a country work towards improving them? We will also study the effects of these imbalances.

Extraits

[...] The companies which are the best-known are, for example, AIRBUS, which sells almost all of its production abroad, or LVMH, which is a Holding company included several of the biggest companies in French luxury such as Louis Vuitton, Tagheuer or Guerlain. Except for the supermarket chains, the majority of French companies known throughout the world are companies that produce high value-added products. Tourism is also an important factor, too, in the trade balance. As we saw, France was the first destination of tourism. To be again in the first place, France must find ways to attract new tourists in France. [...]

[...] It is divided in three main categories: the current account, the financial account and the capital account. This applies to all countries and it is an interesting topic about which we have chosen to make our case study. We will specifically focus our analysis on the balance of payments in France. We will answer the question which is: What are the elements that can lead to imbalances in the balance of payments? How did external events have influenced the French balance of payments? What has to make a country to improve them? [...]

[...] Analysis of the French Balance of payments before 1999 A. The position of France in World Trade French exports and imports of goods and services in % of world trade total (Source: http://www.ladocumentationfrancaise.fr/revues-collections/problemes-economiques/graphiques/economie-pays-france.shtml, visited the 13th of December 2007) This graph presents the part in percentage of France in the world exports and imports. The decrease of the market share of France in the imports and in the exports of the world trade is not due to a decline of its international exchanges. [...]

[...] Thus, exports will be increased and imports decreased. B. The government To encourage the Small and Medium Enterprises (SMEs) to export most of their production, government assistance might be an option. This practice is, for example, already introduced in Germany where the majority of SMEs exports nearly 50% of their total production (source: les echos,Octobre 2007). This would restore in part the imbalance (more imports than exports). In addition, France has to change its way of behaving and not think first of its domestic consumption and growth. [...]

[...] This is based on the functioning of the foreign exchange market: If a country has a deficit in its current account, it signifies that the country lacks foreign currency to settle its purchases to the rest of the world. It must therefore ask it on the foreign exchange market, that lowers the value of its currency, in relation to other currencies. Therefore, the exchange rate of the national currency decline, which encourages exports and limit imports, which would ultimately rebalance the trade balance and the current account. The process is reversed in the event of a surplus in the current account. [...]