Explain the phenomenon of capital flight, International Economics

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Q. Explain the phenomenon of capital flight.

Answer:

The reserve defeat accompanying a devaluation scare is habitually labeled capital flight for the reason that the associated debt in the balance of payments accounts is a private capital outflow. Capital flight may perhaps force the central bank to devalue sooner and by a larger amount than planned for the reason that the central bank's reserves are low to begin with.


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