Define the balance of payments problem in international capital flows.
Balance of payments (BoP): It inflows capital as like:
• Foreign direct investment (FDI) into machinery and plant. In the long term Gross Domestic Product rises but profits are sent back to investing country. The role of multi-national companies.
• Short term loans that can be withdrawn at short notice leading to abrupt balance of payments and exchange rate crisis as like Argentina in 2002.