Autonomous and accommodating transaction

Posted by / 06-Nov-2019 00:00

Autonomous and accommodating transaction

These transactions pertain to funding or withdrawal from the official reserve system using gold, special drawing rights and foreign exchange reserves.Welcome to Sarthaks e Connect: A unique platform where students can interact with teachers/experts/students to get solutions to their queries.Autonomous transactions are the transactions between the residents of two countries which take place due to the consideration of profit.Autonomous items are not conditioned by the Bo P status of the country, i.e. These transactions are not done to establish identity of Bo P. transactions are those transactions which are not done due to the consideration of profit but to restore identity of Bo P.Accommodating transactions are also known as ‘below the line items’ and include foreign exchange reserves and borrowings to meet Bo P deficit.

The sources used to meet a deficit in BOP, are: (i) Foreign exchange reserves; (ii) Borrowings from IMF or foreign monetary authorities.For properly understanding the structure of balance of payments we should have clear under­standing of autonomous and accommodating items.(i) Autonomous items: Autonomous items in the BOP mean those items, which are motivated by profit consideration.These refer to transactions that take place to cover deficit (or surplus) arising from autonomous transactions.These items are also called ‘below the line items’.

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Because of government financing, official settlements are seen as accommodating items to keep the BOP identity. may borrow from abroad or make withdrawals from foreign exchange reserves.