In a symptom that deeper financial threats

In the recent years one question had been asked very frequently, Does the current
account imbalances matter? And if yes, then what impacts do the imbalances have on the economy? Or how does a comparison
between a global size of IFM where financial flows are so huge that they
dominate the current account of an individual economy? I wanted to look for answers
to questions like these.

Well, in short Balance
of Payments imbalances have both Merits and Demerits. But analyzing these is not
easy as each country is different and application or effects of these merits/demerits
changes from country to country and from time to time. In other words, However, deficits are neither bad nor are surpluses good. A deficit may
indeed promote development. But the conditions necessary for this are
restrictive and often not fulfilled as still, trade
deficits imply that we are living beyond our means and accumulating too
much debt. The lesson from the recent past (The financial
crises) is thus that renewed excessive imbalances must ultimately be reduced or
avoided. As market Demand and supply plays an
important role here, economic policy responses required to change for each
individual case demanding its own correct strategy, each problem has its own
root causes.

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The same factors
that dictate careful attention to global imbalances also imply, however, that
data on gross international financial flows and positions are central to any
assessment of financial stability risks. The balance sheet mismatches of
leveraged entities provide the most direct indicators of potential instability,
much more so than do global imbalances, though the imbalances may well be a
symptom that deeper financial threats are gathering.

Organization of the research

The
present research paper is divided into five chapters. The first chapter
describes the problem, purpose, and
structure of this paper. In the second chapter,
the Balance of payment is introduced. The subchapters 2.1 summarizes the Balance
of Payment in general context. The subchapters 2.2 to 2.4 describes the different
sections of Balance of Payment including Capital account, Financial account, and Current Account.  And of Chapter 3 is the aim of this section
is to demonstrate the importance and different types of balances of Current
account are explained in brief. In point
in subchapters 3.1 and 3.2, the Surplus and Deficit balance are highlighted
upon in detail. The point 3.3 and 3.4 provides a detailed analysis of cause and effect of the different balances and
its importance for the economy in a long and short run. Finally, Chapter 4
summarizes and presents the results of this research project.