INTERNATIONAL CAPITAL FLOWS

International Capital Flows

International Capital Flows

International Capital

International capital flows are the financial side of international trade. When someone imports a good or service, the buyer (the importer) gives the seller (the exporter) a monetary payment, just as in domestic transactions. If total exports were equal to total imports, these monetary transactions would balance at net zero: people in the country would receive as much in financial flows as they paid out in financial flows. But generally the trade balance is not zero (Blaug, 2007, 347).

Because the capital account is the mirror image of the current account, one might expect ...