Capital Account

Capital account is a national account that shows a country’s balance of payments. This account will give you the exact picture of a country’s economy, its economic outlook and future strategies to achieve the desired goals. If the financial account indicates exports and imports in large volumes, then the country has an open economy supporting free trade. However, an underdeveloped capital market may be indicated if a country’s capital account shows little international activity. Such an account also include foreign direct investment, transfer of fixed assets and ownership, royalties, patents, inheritance of taxes and also any changes that may occur in the reserve account. For the purpose of regulating capital account flows, controls in place are used by many countries to stabilize the effects of large capital inflows and outflows on the economy of a nation. The current account and the capital account together make up for a country’s balance of payments.

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Edited and Updated 31st May 2014

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