What does net capital outflow represent?

Net capital outflow reflects the difference between the value of foreign assets that residents of a country purchase and the value of domestic assets that foreign investors purchase. A positive net capital outflow indicates that residents are investing more in foreign assets than foreigners are investing in domestic assets, which can signify a tendency for capital to seek higher returns overseas. Conversely, a negative net capital outflow suggests that foreign investments in the country exceed domestic investments in foreign assets. This measure is crucial for understanding a country’s position in global finance, as it demonstrates how domestic resources are being allocated and the level of engagement with the international capital markets.