Foreign Factor Income Edit Meaning

1.

in economics, the net income from assets that are owned by foreigners. The citizens of a country will own assets that are physically located overseas (for example, real estate in another country, shares of foreign stock, or even labor performed while an expatriate), and those assets earn income. At the same time, foreigners likewise earn income on assets located in ones' own country.

If domestically-owned assets located abroad earn more income than domestic assets owned by foreigners, then there will be a net flow of income from overseas. This is a collateral benefit to running a trade surplus, especially over several years.

An example might be the United Kingdom (UK) during the 19th century. Prior to the 1880's, the UK exported far more than it imported. With the foreign money, it bought assets in the economies of other countries, such as the USA, Continental Europe, and the future Commonwealth of Nations. These assets naturally earned a lot of income, as they accumulated over many decades. The income from these assets was so large that, after the 1880's, the UK ran a trade deficitbut still had a current account surplus.

In the case of the UK, the current account surplus from the NFFI was still large enough that the UK could continue to buy foreign assets that earned income, even as its trade deficit grew during the early 20th century.

Gross national product (GNP) is gross domstic product (GDP) minus net foreign factor income (NFFI).

See capital account balance, balance of payments, nipa, external balance