Accommodating transactions
Also called: Below the line items · Topic: Balance of Payments and Exchange Rates · NCERT: Class 12, Ch 6 "Open Economy Macroeconomics"
Meaning
Accommodating transactions are international transactions made only to fill the gap in the balance of payments. They are not made for profit or trade. They are recorded "below the line". The main one is official reserve transactions, where the central bank sells foreign exchange to cover a deficit or buys it to absorb a surplus. They matter most under a fixed exchange rate, where the central bank must keep stepping in.
Example
Suppose India's autonomous inflows fall short of outflows and the BoP shows a deficit. RBI then sells dollars from its reserves to cover the gap. That sale is an accommodating transaction.
Don't confuse with
- Autonomous transactions: these are made for their own reasons, such as profit, and their balance creates the surplus or deficit. Accommodating transactions only respond to that gap.
Related concepts
- Balance of payments surplus
- Autonomous transactions
- Official reserve transactions
- Errors and omissions
- International investment position