Are international capital flows a problem, Business Economics

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Are international capital flows a problem?

Problem: Capital flows can have an adverse outcome onto:

a. Balance of payments (BoP): Shortly term capital inflows can be like:

• Foreign direct investment

• Short term loans

b. Exchange rates: In the demonstrate figure opposite FDI by British investors into Belize sees an increase into the demand for the Belize dollar resulting within an appreciation of which currency

1063_International capital flows.png

c. Domestic prices and competitiveness inflows lead to an appreciation of the currency creating imports cheaper and also exports dearer. Unemployment might follow.


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