With the increase growing of a global market, an investment for a nation is no longer restricted by nation’s savings rates. Yes, the domestic investment can is still affected by saving rate although if it is a fairly attractive yield, compare to the world savings. By the same approach, an excess of domestic savings may easily flow out of the country when foreign export markets, offering a more eminent interest rate. It is belief that most external imbalances are a dangerous threat to stability in the global and domestic economy.

We can view the developments on the international capital market is similar to the development of domestic capital market between the U.S. union. While the world is still far from a unified capital market, there is considerable evidence of growing integration of domestic capital markets. In many countries, starting with the United States in the early 1970’s have reduced or completely eliminated external capital transactions restrictions (mostly related on trade in debt). The prevailing view today is that financial markets have developed a series of loosely connected national markets into a single global company.

The fluctuations in interest rates across national borders is the measure most commonly suggested capital mobility. The international market is unlike domestic capital market in one important respect: the potential of changing the exchange rate. However, compare emitted at rates of interest on financial instruments in different countries, but expressed in a common currency. Equalization of these factors is known as the interest rate closed. For example, the difference between the interest rate for deposits in euros and dollars in domestic deposit interest rates (3 months) has been steadily narrowed down since the early 1970s. This is after U.S. has eliminated the last remnants of controls on capital transactions.

A comparability of interest rates in a common currency is obviously a very limited test and review of the integration of capital markets. This is because interest rates do not include foreign exchange risk. However, severe narrowing of the interest rate shows the importance of prior restrictions on capital movements.

The increase in international capital markets may also be approximately estimated by considering the volume of cross-border financial transactions. In the meantime, private sales and capital increased, as measured by the average input and output of crude, fast, albeit from a very low level of about 2 percent of GDP in the mid-1970s, more than 5 percent in 1990. Although data are not enough to make a definitive statement of outstanding claims and obligations for international, international bank lending, which is about 80 percent represented about gross flows indicated in Figure 1.3 have increased as a percentage of GDP (total GDP), the transition from 6 percent in mid-1970 to 10 percent in 1980, 17 percent from 1989.

The transactions of international capital flows should be further increased by the 1980s, when many economists, the international mobility of capital, reported as the cause of current account imbalances in the right time. Indeed, gross flows of financial capital has been reduced during the first half of the decade, especially since bank lending fell in triggering the debt crisis in developing countries. Moreover, if there is an international capital market is limited to developed economies. You are responsible for almost all the increase in international capital movements. The United States has played a surprisingly small role in the expansion of global capital markets.