Net capital outflow

The importance of NCO. The domestic real interest rate determined in the domestic market for loanable funds moves along the NCO curve to determine the quantity of currency available for foreign exchange. This in turn determines the real exchange rate.

Net capital outflow (NCO) is the net flow of funds being invested abroad by a country during a certain period of time (usually a year). A positive NCO means that the country invests outside more than the world invests in it. NCO is one of two major ways of characterizing the nature of a country's financial and economic interaction with the other parts of the world (the other being the balance of trade).


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