Longer-term capital flows reflect short-term interest rate differentials and exchange rate expectations.

Question

Quizplus · Accepted Answer

Longer-term capital flows are more influenced by factors such as economic growth prospects, political stability, and differences in long-term interest rates rather than short-term interest rate differentials and exchange rate expectations, which tend to influence short-term capital flows more.

Longer-Term Capital Flows Reflect Short-Term Interest Rate Differentials and Exchange