Why Net Capital Outflow Exports?
Net Exports Equal Exports Minus Imports. Net Capital Outflow Equals Domestic Residents' Purchases of Foreign Assets Minus Foreigners' Purchases of Domestic...
Net exports equal exports minus imports. Net capital outflow equals domestic residents' purchases of foreign assets minus foreigners' purchases of domestic assets. Every international transaction involves the exchange of an asset for a good or service, so net exports equal net capital outflow.
Why does net capital outflow equal net exports?
By an accounting identity, Country A's NCO is always equal to A's Net Exports, because the value of net exports is equal to the amount of capital spent abroad (i.e. outflow) for goods that are imported in A. It is also equal to the net amount of A's currency traded in the foreign exchange market over that time period.
Is net capital outflow net exports?
Net capital outflow is the acquisition of foreign assets by domestic residents minus the acquisition of domestic assets by foreigners. An economy's net capital outflow always equals its net exports. An economy's saving can be used to either finance investment at home or to buy assets abroad.
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