Business managers and investors need BOP data to anticipate changes in host-country economic policies that might be driven by BOP events. From the perspective of business managers and investors, list three specific signals that a country’s BOP data can provide.
The BOP is an important indicator of pressure on a country's foreign exchange rate, and thus on the potential for a firm trading with or investing in that country to experience foreign exchange gains or losses. Changes in the BOP may predict the imposition or removal of foreign exchange controls.
Changes in a country's BOP may signal the imposition or removal of controls over payment of dividends and interest, license fees, royalty fees, or other cash disbursements to foreign firms or investors.
The BOP helps to forecast a country's market potential, especially in the short run. A country experiencing a serious trade deficit is not likely to expand imports as it would if running a surplus. It may, however, welcome investments that increase its exports.