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Capital Account

 

To aid simplicity it can be split into two:

        Short term money flows

        Long term money flows

 

Short term money flows

Sometimes we describe this money as hot money or speculative money.  Money is moved from country to country in the hope of making a profit, whether it is from higher interest rates in one country or because changes in the exchange rate are expected.

 

Long term money flows

These are mainly associated with long term savings and investment.  Foreign companies may choose to invest in the UK by building a new factory or widening its share portfolio by investing in the London Stock Exchange.

 

 

E-mail Steve Margetts