Question

what are official reserve transactions.Explain their importance in balance of payments?​

Answer 1

Answer:

Official reserve transactions are the transactions made by the Central Bank which cause changes in its official reserves of foreign exchange. This happens only when an economy withdraws from its stock of foreign exchange reserves to finance deficit in its overall BOP..

Explanation:

Hope it is helpful for you

good night

Answer 2

Answer:

Official reserve transactions refer to transactions by the central bank that cause changes in its official, reserves of foreign exchange. Such transactions take place when a country withdraws from its stock of foreign exchange reserves to finance deficit in its overall balance of payments (BOP). A country with surplus in its overall BOP leads to rise in foreign exchange reserves.

Official reserve transactions are very important as they help to bring a balance in the country's overall balance of payments. So, such transactions act as accommodating Item in BOP.