Countries that are exporting capital will always be international
creditors.
True or False?
The answer is false. It is true that countries whose savings
exceeds their investment and who thus are experiencing net
capital outflows will have equivalent current account surpluses.
But this does not mean that they are net international creditors.
That will depend on how long capital has been flowing out. The
issue is whether the balance of indebtedness is positive---that is,
whether the stock of foreign assets owned by domestic residents
exceeds the stock of domestic assets owned by foreign residents.
This net stock will depend on the existence and magnitude of
previous net outflows of capital rather than on what is happening
in the current year.
Notice that the term "export of capital" refers to the
export of domestic savings and not the export of capital equipment
and the term "capital" here refers to assets owned.
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