Affiliation:
1. K.R. Mangalam University, India
Abstract
The complexity of global financial interconnections, their role in transmitting shocks across borders, and the effectiveness of fundamental economic factors in safeguarding countries against financial instability have all garnered increased attention. In recent decades, substantial research has been devoted to understanding the importance of international capital flows in the context of financial stability. Capital flows affect people and companies on almost every scale, including national governments. Analysts frequently examine several subsets of capital flows, including changes in asset classes, venture capital, mutual fund, capital spending, and government budget movements. Capital flows can be more erratic in developing economies since the economy may go through phases of fast expansion followed by subsequent decline. Increased capital inflows may result in credit booms and asset price inflation, but they may also be countered by losses from currency depreciation based on exchange rates and drops in equity pricing.