Emerging markets undertake capital account liberalization to encourage
A) short term inflows
B) long term inflows
C) short term outflows
D) long term outflows
E) all of the above

Question

Quizplus · Accepted Answer

Emerging markets undertake capital account liberalization to encourage long term inflows of foreign investment, such as foreign direct investment, portfolio investment and foreign loans. This is because long term inflows contribute to economic growth and development, while short term inflows can be volatile and destabilizing. Short term outflows are not encouraged as they can lead to currency depreciation and balance of payment problems.

Emerging Markets Undertake Capital Account Liberalization to Encourage