Imbalances in the net capital outflow (NCO) are associated with imbalances in the trade balance (or net exports, NX), following the identity NCO = NX.

What is net capital outflow equal to?

Net capital outflow equals domestic residents' purchases of foreign assets minus foreigners' purchases of domestic assets. • Every international transaction involves the exchange of an asset for a good or service, so net exports equal net capital outflow.

What is capital inflow and outflow?

Capital flows are transactions involving financial assets between international entities. ... Capital outflow generally results from economic uncertainty in a country, whereas large amounts of capital inflow indicate a growing economy.