Describe a transaction/scenario in which a portfolio investment leads to a positive net capital outflows (NCO>0).

Expert Solution

Net capital outflow means The Net fund which is invested in international country. Net capital outflows takes two forms: foreign direct investment, and portfolio investment

=>positive net capital outflow means domestic people buy more foreign Assets than Foreigner buy domestic assets. portfolio investment means investment in Equity debt and financial instruments which is diversified the risk.

*Here the Transaction for Net positive capital outflow :-

Suppose indian boy named Ali investment in the USA securities of $20000 Bonds , $40000 equity and $5000 in cash. whereas The USA boy names Alan invested in Indian securities of $300000 bonds , $60000 equity and $6000 in cash. so the positive Net positive capital outflow For USA :-

= total investment in portfolio by domestic people - total investment in portfolio by foreigner

= $ 366000- $ 245000

= $121000

=> so here the capital outflow is positive e.i NCO >0

Rahul Sunny answered 2 years ago

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