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is it possible for an indebted country to continue borrowing, if the capital inflow of a...

is it possible for an indebted country to continue borrowing, if the capital inflow of a country is not sufficient to cover the current account deficit? what impact does this current account deficit put on its domestic currency?

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Answer #1

No, it is not possible for an indebted country to continue borrowing, if the capital inflow of a country is not sufficient to cover the current account deficit because there will be arises the situation of unstable economy so no country or any other institution will provide loan.

If the current account deficit puts on its domestic currency then currency Wii be depreciate because to restore the trade balance.

If currency will depreciate then net export increases.

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