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_______________________________ can set the stage for international financial investors first to send their funds to a country and cause an appreciation of its exchange rate and then to pull their funds out and cause a depreciation of the exchange rate and a financial crisis as well.

User Spektre
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Answer:

Trade balance

Step-by-step explanation:

A positive trade balance will result in currency appreciation because more goods are exported than imported, which means that there is a net inflow of the home country's currency, increasing its value against foreign currency.

This can lead first to more foreign direct investment because a trade balance is a sign of a strong economy, however, in the long run there can be a radical change in the business cycle: the appreciated currency will make the home country's goods more expensive, reducing the demand for them abroad, in turn decreasing exports, turning the trade balance into negative numbers, and causing a net ouflow of foreign direct invesment due to the weaker economy, and the capital losses because of the currency depreciation.

User Shivaughn
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