THE BALANCE OF PAYMENTS: IMPLICATIONS FOR EXCHANGE RATES 93
more than the payments, the current account will show a surplus. A country may adopt
different methods to finance its current account deficit (CAD) and to deploy its current
account surplus. The country may borrow from abroad by issuing securities like bonds,
equity stocks, and/or it may sell some of its operating businesses abroad in order to finance
the deficit. Thus, a CAD may result in a reduction in a country’s foreign assets (real assets
and financial assets) or in an increase in its foreign liabilities.
If a country has a current account surplus, it may buy foreign assets which include
financial assets like bonds and shares. It may utilize its current account surplus to redeem ...