These foreign reserves can be used as a buffer against potential capital outflows during financial crises.
Massive capital outflow is usually a sign of a greater problem, not the problem itself.
They say it has been undermined by a capital outflow as investors search for the most secure markets.
The two may interact with one another- for instance when countries try to control capital outflows in order to maintain a given exchange rate.
As a direct result of the current economic crisis, capital outflow - which had previously been reversed - has again become a relevant problem.
Meanwhile, capital outflow has finally come to a stop.
This depreciates the exchange rate of local currency through capital outflow.
The national income accounts identity shows that net capital outflow always equals the trade balance.
During the crisis there were sudden and large capital outflows leading the rupiah to go into free fall.
If this happens, we may see a new wave of capital outflow.