OPPapers.com Essay Index >> Miscellaneous >> Should Rigorous Controls Be Imposed On Transnational Capital Flows?
We have many free term papers and essays on Should Rigorous Controls Be Imposed On Transnational Capital Flows?. We also have a wide variety of research papers and book reports available to you for free. You can browse our collection of term papers or use our search engine.
Should Rigorous Controls Be Imposed on Transnational Capital Flows? I. INTRODUCTION Transnational capital flow is a term coined to describe the movement of capital
Submitted by jughead511 on February 3, 2008
Category: Miscellaneous
Words: 1906 | Pages: 8
Views: 115
Popularity Rank: 99,371
Average Member Grade: N/A (Add a Comment / Grade this Paper)
I. INTRODUCTION
Transnational capital flow is a term coined to describe the movement of capital across national
boundaries. International financial and capital flows have experienced a phenomenal upsurge during the
late twentieth century. According to the latest estimates, foreign exchange to the tune of one to two
trillion US dollars is transacted internationally every day. Significantly, exchanges in trade and services
constitute only a tiny fraction of these transactions, while the majority is composed of movement of shortterm
capital and foreign investment. While the benefits of such flows are manifold, there are negative
side-effects too. Unfettered movement of capital in developing countries has triggered off several
economic crises in recent history and there is a compelling case for tempering such flows through
imposition of adequate controls.
I.i Types of Global Capital Flows
Transnational capital flows can be broadly classified into the following categories:
1) Foreign Direct Investment (FDI): Acquisition of companies, physical investment in plants and
equipment.
2) Foreign Portfolio Investment: Investments in capital markets.
3) Loans and credit issued by International Banks to local lenders.
4) Currency transactions, primarily as part of currency hedging strategies.
5) Global insurance.
I.ii Benefits of Free Capital Flows
Free Capital Flows lead to greater flexibility in international financial markets and financial transactions
across national boundaries, contributing to overall development of the economy and a rise in living
standards, because of increased foreign investment and financing. In such an environment, investors also
enjoy higher returns and better portfolio diversification. This translates into deepening efficiency and
sophistication of domestic financial markets, by letting the...
You must Login to view the entire paper.
If you are not a member yet, Sign Up for free!