INDEXSr no.ParticularsPage no.

1Chapter 1Introduction to capital.

2

2Chapter 2 Introduction to international capital movement Types of international capital movement Factors affecting international capital movement 5

3Chapter 3 Capital flows, sudden stops, and international reserves Capital movement to developing countries.16

4Chapter 4Case study36

5Conclusion45

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 outthe 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 short-term 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.

Signature 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

This is to certify that Ms. Mitali C SawantDesai of

M.Com PartI (Sem.-II) has

Successfully completed the project titled

INTERNATIONAL CAPITAL MOVEMENT

Under my guidance for the academic year 2013-14. The

Information submitted is true and original as per my knowledge.

_______________________ __________________________

(Prof. Moni Alex) (Prof. )

Project Guide (Internal) Project Guide (External)

______________________ _________________________

Prof. Gopi Shamnani Dr. (Mrs.) Bhavana Motwani

Course Co-ordinator (M. Com) Principal