Capital Account

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DEFINITION of 'Capital Account'

A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public and private international investments flowing in and out of a country.

May also refer to an account showing the net worth of a business at a specific point in time.

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BREAKING DOWN 'Capital Account'

The capital account includes foreign direct investment (FDI), portfolio and other investments, plus changes in the reserve account. The capital account and the current account together constitute a nation's balance of payments.

Since large capital inflows or outflows can have destabilizing effects on a nation's economy, many countries have controls in place to regulate capital account flows.

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RELATED FAQS
  1. What is the difference between a financial account and a capital account?

    A financial account is used to measure the increases or decreases in international ownership assets that a country is associated ... Read Full Answer >>
  2. What does a positive capital account balance mean?

    A positive capital account balance indicates that more money is flowing into, rather than out of, a country. A country's ... Read Full Answer >>
  3. What does a negative balance in the capital account mean?

    A negative capital account balance indicates a predominant money flow outbound from a country to other countries. The implication ... Read Full Answer >>
  4. How does a capital account illustrate the strength of investment markets for a country?

    A nation's capital account can be a major indicator of how much interest the nation generates among foreign investors. A ... Read Full Answer >>
  5. What does it mean when a country has little activity in its capital account?

    Since a country's capital account represents money flow into the country through foreign investment, having only a small ... Read Full Answer >>
  6. How does the balance of trade impact a nation's capital accounts balance?

    The balance of trade doesn't necessarily impact the capital account balance, but the two are very much related. A nation's ... Read Full Answer >>
  7. At what level is the current account deficit considered excessive, in terms of percent?

    The current account is one of the main components of the balance of payments, which records the monetary transactions between ... Read Full Answer >>

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