Unit XII – International

Capital Movements

Day and Date:

Unit Highlights…
 International capital markets
 Global capital movements - FDI and
portfolio investments
 Important currencies of the world
 Role of MNCs
Text book reference chapters…
 International Economics by Dominick
Salvatore – Chapter 12

 International Economics by Francis

Cherunilam – Chapter 21 & 22
International Capital Markets

International Capital Markets enable

channeling of money across borders
from those who do not have an
immediate productive use for it to those
who do.
Why global capital movements?
Free movement of capital enables,
 efficient allocation of capital

 faster economic convergence of less

developed countries
 better consumption smoothing

 diversification of financial portfolios.

Global capital movements…
challenges

 Currency crisis
 International fraud and money laundering
 Volatility in the allocation of resources
Global capital movements - FDI

Capital invested by corporations in countries

other than their domicile their home countries
Global capital movements –
portfolio investment

Foreign investors buying domestic debt

securities.
Major Currencies of the world…

 U.S Dollar
 Euro
 Japanese Yen
 British Pound, and
 Swiss Franc.

These are the most liquid currencies, can be converted or exchanged

at almost any time at the current spot rate
Multinational Company (MNC)

A corporation that has its facilities and other

assets in at least one country other than its
home country.
Role of MNC
 Generate income and employment
 Technology transfer
 Transfer of managerial skills
 Export promotion
 Enable mobility of resources
 Promote innovation
 Increase competition; Break monopolies
 Drive globalization
To conclude...

It is imperative for nation like India to attract

cross-border capital to fulfill its
developmental aspirations.
Now you should be able to
explain,
 International capital markets and why
they exist.
 The importance of global capital
movements and the challenges
 FDI and portfolio investments
 MNC and their role