NET CAPITAL OUTFLOW THE LINK BETWEEN THE TWO MARKETs
We begin by recapping what we’ve learned so far in this chapter. economy coordinates four important macroeconomic variables: (l), net capital outflow (NeO). and net exports (NX). Keep in mind s= 1+ N<;O ‘e have been discussing how the saving (S), domestic investment following identities:
Neo = NX.
In the market for loan able funds, supply comes from investment and net capital outflow, and the real interest rate foreign-currency exchange, supply comes from net the real exchange rate balances supply and demand. Net capital outflow is the variable that links these capital outflow is a piece of demand. A person who by obtaining resources in the market for loan able capital outflow is the source of supply. A person dollars to exchange them for the currency of that comes from domestic In the market for from net exports, and for loan able funds, net finance this purchase -currency exchange, net country must supply