Capital outflow

Capital outflow is an economic term describing capital flowing out of (or leaving) a particular economy. Outflowing capital can be caused by any number of economic or political reasons but can often originate from instability in either sphere.

Regardless of cause, capital outflowing is generally perceived as always undesirable and many countries create laws to restrict the movement of capital out of the nations' borders (called capital controls). While this can aid in temporary growth, it often causes more economic problems than it helps.

# Massive capital outflow is usually a sign of a greater problem, not the problem itself.
# Countries with outflow restrictions can find it harder to attract capital inflows because firms know if an opportunity goes sour they won't be able to recover much more of their investment.
# Governments that institute capital controls inevitably send a signal to its citizens that something might be wrong with the economy, even if the laws are merely a precautionary measure.

Argentina experienced rampant and sudden capital outflows in the 1990s after its currency underwent dramatic pressure to adjust in light of the fixed exchange rate, leading to a recession. Modern macro-economists often cite the country as a classic example of the difficulties of developing fledgling economies.

ources

Blustein, Paul. "And the Money Kept Rolling In (And Out)"


Wikimedia Foundation. 2010.

Look at other dictionaries:

  • capital outflow — UK US noun [C or U] ► ECONOMICS, FINANCE the amount of money that leaves a country s economy and is then kept or invested in other countries during a particular period: »The officially recorded capital outflow was a modest $1.4 billion …   Financial and business terms

  • Capital Outflow — The movement of assets out of a country. Capital outflow is considered undesirable and results from political or economic instability. It occurs when foreign and domestic investors sell off their assets in a particular country because they no… …   Investment dictionary

  • Net capital outflow — The importance of NCO. The domestic real interest rate determined in the domestic market for loanable funds moves along the NCO curve to determine the quantity of currency available for foreign exchange. This in turn determines the real exchange… …   Wikipedia

  • Net Capital Outflow — (NCO) is one of two major methods of determining the nature of a country s foreign trade (the other being the current account balance). NCO is the quantity of foreign assets held by residents of a given country minus the quantity of domestic… …   Wikipedia

  • outflow — out‧flow [ˈaʊtfləʊ ǁ floʊ] noun [countable, uncountable] ACCOUNTING ECONOMICS money which is being taken out of a company, country etc: • The insurance company paid over $1.33 billion to policyholders, creating a vast cash outflow. • The… …   Financial and business terms

  • Outflow — (contrasted with inflow) may refer to: Capital outflow an economic term describing capital flowing out of (or leaving) a particular economy. Bipolar outflow in astronomy represents two continuous flows of gas from the poles of a star. Discharge… …   Wikipedia

  • Capital flows in Japan — History = After World War II, Japan s return to world capital markets as a borrower was slow and deliberate. Even before the war, Japan did not participate in world capital markets to the same extent as did the United States or West European… …   Wikipedia

  • Capital account — In financial accounting, the capital account is one of the accounts in shareholders equity. Sole proprietorships have a single capital account in the owner s equity. Partnerships maintain a capital account for each of the partners. In economics,… …   Wikipedia

  • Capital Account Convertibility — or CAC is a monetary policy that centers around the ability to conduct transactions of local financial assets into foreign financial assets freely and at market determined exchange rates. [ [http://inhome.rediff.com/money/2006/sep/04faq.htm FAQ:… …   Wikipedia

  • outflow — out|flow [ˈautfləu US flou] n 1.) when money, goods etc leave a bank, country etc outflow of ▪ the outflow of capital from the developed countries 2.) the flow of water or air from something outflow of ▪ an outflow of gas escaping from the main… …   Dictionary of contemporary English


Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”

We are using cookies for the best presentation of our site. Continuing to use this site, you agree with this.