Capital and financial account
Definition. The capital and financial account is the part of the balance of payments that records cross border flows of financial assets and capital, including foreign direct investment, portfolio investment, bank lending and changes in official reserves. It captures changes in the ownership of assets between residents and non residents.
A net inflow occurs when foreigners acquire more domestic assets than residents acquire abroad. It typically offsets the current account balance to keep the overall accounts in equilibrium.
This term belongs to The Balance of Payments in A Level Economics. Read the full chapter for the diagrams, worked examples and exam technique.
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