Capital account balance
Definition
The capital account balance represents financial transactions involving assets like real estate, stocks, bonds, or loans between a country and other nations. It measures changes in ownership of national assets.
Analogy
Think of buying or selling shares in companies as transactions that affect your capital account balance. When you buy shares (inward investment), money flows into your capital account. When you sell them (outward investment), money flows out.
Related terms
Foreign direct investment (FDI): Investment made by individuals or companies from one country into businesses located in another country.
Portfolio investment: Investments made by individuals or institutions in foreign financial assets such as stocks and bonds.
Official reserves: Assets held by central banks to support their countries' currencies' stability and fulfill international obligations.
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