Capital movement theory describes international capital movement as any transfer of capital between countries, in the form of physical capital or financial capital, with the goal of obtaining extra profit through interest, dividends, shares, or rental profits from corporations abroad. International capital movement plays an important role in the economic development of many countries by providing outlets for savings, helping to finance underdeveloped countries, easing balance of payments problems, and contributing to more stable economic growth patterns through smoothing of business cycles. One of the most significant economic developments of the 1990s was the surge in international capital flows resulting from greater financial liberalization and technological improvements.

1. Capital Movement
Theory

2. Capital movement theory
• Capital is one of the factors of production
(land labor and entrepreneur are other)
• International capital movement is any transfer
of capital between countries (with goal of
obtaining extra profit)

3. Capital movement
• It can be in the form of physical capital and
financial capital
• The profit can be interest rate, dividend,
share, on profit of corporation abroad or rent.

4. Capital movement
• International capital movement have played an
important role in the economic development of
several countries. They provide an outlet for saving
for the lending countries which helps to smooth out
business cycles and lead to a more stable pattern of
economic growth. On the other hand, they help to
finance development of under-developed countries.
They also help to ease the balance of payments
problems of developing economies. Thus,
international capital movement have an important
role to play in the balance of payments adjustments
mechanism.

5. Capital movement
• The term international capital movement refers
to borrowing and lending between countries.
These capital movements are recorded in the
capital account of the balance of payment.
• One of the most important developments in the
world economy in the 1990s has been the
spectacular surge in international capital flows.
These flows have emanated from a greater
financial liberalisation, improvement in
information technology, emergence and
proliferation of institutional