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INDEX

Sr no.

Particulars

Page no.

Chapter 1
Introduction to capital.

Chapter 2
Introduction to international capital movement
Types of international capital movement
Factors affecting international capital movement
Chapter 3
Capital flows, sudden stops, and international
reserves
Capital movement to developing countries.
Chapter 4
Case study

16

Conclusion

45

36

OBJECTIVE OF THE STUDY


Broad objective: The Broad objective of the report is to learn about the
INTERNATIONAL CAPITAL MOVEMENT.

Specific Objectives:
To study the dynamics of international capital flows.
To find out the trends in international capital flows.
To study the various types of capital movement.
To study the governance of capital flows.

EXECUTIVE SUMMARY
International capital movements play a positive role in the efficiency of
economic activity and in economic development. On the other hand, the rising volume
of such movements has been found to give rise to numerous problems; they reduce the
room of manoeuvre of national economic policy, increase exchange rate variability
and make countries susceptible to currency and financial crises. Calls for capital
controls derive from these concerns. However, capital movements are not the reason
for such problems. On one hand, foreign trade, capital movements and cross-border
ownership all restrict the independence of a country's economic policy, but on the
other hand they are accompanied by significant benefits.
As long as national currencies continue to exist, there will be uncertainty
about exchange rates. The character of the uncertainty depends on the exchange rate
regime. A degree of volatility is inherent in all floating rates, as in asset prices in
general. A system of fixed rates reduces exchange rate fluctuation, but is conversely
susceptible to currency crises.
Such crises usually occur because economic policy is at odds with the
exchange rate target. Globalisation may well have promoted the spread of these crises
from country to country. The effects of this contagion are less serious in countries with
strong economic fundamentals as well as an efficiently supervised banking system.
Restricting movements of capital does not offer any guaranteed protection against
such crises.
Earlier experience of crises suggests that the biggest risks relate to shortterm capital movements via the banking system. As a currency crisis may be
accompanied by a financial crisis and a banking crisis, its impact on the real economy
can be grave. Many debtors that were originally perfectly solvent may be driven into
insolvency by rises in the domestic value of loans in foreign currencies or because the
bank calls in their outstanding loans.

Experiences of capital controls in the 1990s offer no support for the


view that this is an effective approach in the long term, though they may have the
desired impact in the short run. Market operators usually learn how to get around
restrictions that continue for a long time. Experience in many countries indicate that
deregulating capital movements without strengthening the banking system and
intensifying its supervision make a country extremely vulnerable not only to currency
crises but also to financial and banking crises.

DECLARATION
I, Ms. Mitali C. SawantDesai, the student of M.Com in Management Semester
II (2013 2014) hereby declare that I have completed the Project on
INTERNATIONAL CAPITAL MOVEMENT.

The information submitted is true and original to the best of my knowledge.

Si
gnature

PROJECT REPORT ON

INTERNATIONAL CAPITAL MOVEMENT

MASTERS OF COMMERCE IN MANAGEMENT


SEMESTER II
(2013-14)

SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS


FOR THE AWARD OF DEGREE OF
MASTERS OF MANAGEMENT

SUBMITTED BY
MS. MITALI C. SAWANTDESAI
ROLL NO. 02

SMT. CHANDIBAI HIMATHMAL MANSUKHANI COLLEGE


ULHASNAGAR -421003

Department of Commerce

Certificate
ThisistocertifythatMs.MitaliCSawantDesaiof
M.ComPartI(Sem.II)has
Successfullycompletedtheprojecttitled
INTERNATIONALCAPITALMOVEMENT
Undermyguidancefortheacademicyear201314.The
Informationsubmittedistrueandoriginalaspermyknowledge.

_________________________________________________
(Prof.MoniAlex)(Prof.)
ProjectGuide(Internal) ProjectGuide(External)

_______________________________________________
Prof.GopiShamnaniDr.(Mrs.)BhavanaMotwani
CourseCoordinator(M.Com)Principal