Question

How would this capital outflow affect Thailand’s real GDP, real interest rate and the exchange value of the currency, the baht, if Thailand was heavily dependent on imported inputs? How will the balance of payments be affected?

Answer 1

Capital outflow causes forex reserves depletion and subsequently when investors park money outside the demand for baht decrease causing exchanges rate deprecation. Moreover the interest rates fall down and thus foreign consumptionand investment is reolaced by domestic consumptions and investment and thus real GDp grows marginally due to lower interest rate regime. Outflows consequently cause lower balance of payments too.

However in long run inetrest rste rise for seeking capital inflows and thus then real GDP shrinks.

PLEASE UPVOTE INCASE YOU LIKED THE ANSWER WILL BE ENCOURAGING FOR US THANKYOU VERY MUCH ALL THE BEST IN FUTURE