Flight of capital designates the extensive and sudden transfer of fortunes, money, precious metals or real values into the foreign country and/or the decrease of the demand for active in the domestic national economy.

The goal of the flight of capital is in case of an inflation the preservation of value or otherwise the evasion of domestic taxes (see also tax evasion, tax evasion). The phenomenon flight of capital stands thereby regularly in connection with national acting. Flight of capital can often be rated as "“tuning with the feet"”, since the factor of production capital can be transferred due to its high mobility faster than other factors of production. If the restaurant subjects expect an unfavorable change (tax) of the juridical system, they possibly react with departure of their capital.

The flight of capital proven in the balance on capital account alone regarded states however nothing over the economic situation and development of a national economy, relevantly is alone the balance of payments, in which all economical partial balances are contained. To the elucidation by the example of the German economy: The enormous strength of the German economy makes it possible that a great many goods are exported and but much money into the country flow (balance of payments surplus). That makes it again possible that for other things much money flows abroad, e.g. Contributions to the European Union and the UN (proven in the transmission balance), expenditures of German tourists abroad (proven in the balance of service transactions) and credits to developing countries and investments into foreign enterprises (both proven in the balance on capital account). There the payments mentioned to a large extent mutually waive themselves are almost balanced the balance of payments, in which all externaleconomical payments settle.

For the decision, in which country invests an enterprise, finally all location factors are in sum decisive. In addition for example also the traffic infrastructure, the communication infrastructure, the juridical system, the monetary system, the bank system, the demand of potential buyers of goods, the qualification of the workers, the number of its disease and strike days etc. the reason for foreign investments of German enterprises is frequent the development of new markets belongs. Frequently production goes there, where goods can be set off.

In the media a flight of capital is occasionally dramatisiert. This is to be clarified by following example.

Example

Straight Luxembourg is considered to many as example of a national economy, into which German capital arrives. If partial amounts of billion (in euro) made of Germany are brought on of Luxembourg accounts, then thereby by any means capital capital is not lost how is occasionally stated.

This becomes clear, if one asks oneself, where in the small State of Luxembourg such amounts of billion should be put on interest-pregnant. Instead it is to be counted rather on the fact that this happens at least partially again in Germany. An important role plays thus the economic circulation.

Only by the recourse to of the services of of Luxembourg banks profit this for the disadvantage of German banks.

Articles in category "Flight of capital"

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