Question

Give the meanings of 'autonomous' transactions and 'accommodating' transactions in the Balance of Payments Accounts.

Answer 1

Autonomous Items in BOP- Autonomous items refer to those international economic transactions that are undertaken with the sole motive of earning profit. Such transactions are independent of the BOP status of a country. Autonomous transactions are also called 'above the line items' in BOP. It should be noted that the overall balance of BOP is governed by the balance of autonomous transactions. The BOP would show a deficit if the autonomous receipts are lesser than the autonomous payments. On the other hand, the BOP would show a surplus if the autonomous receipts are greater than the autonomous payments.
Accommodating Items in BOP- Accommodating items refers to those international economic transactions that are not undertaken with the motive of earning profit such as government financing, injection or withdrawal from the official reserves. Such transactions are undertaken as a consequence of the autonomous transactions. In other words, they are compensating short-term capital transactions that are undertaken to correct the disequilibrium in the autonomous items. For example, if the autonomous receipts are lesser than the autonomous payments, then in the form of accommodating transactions the government might run down its official reserves in order to cover the deficit in the autonomous transactions. Accommodating items are also called 'below the line items' in BOP