The positive effects mainly include:
(1) Promote the improvement of global economic benefits;
(2) improving the balance of payments;
(3) reducing the internal and external shocks of countries;
(4) Accelerate the internationalization of national economies.
The negative effects are:
(1) Impact on the financial system: International capital flows will lead to the expansion and contraction of the balance sheets of the inflow countries or banks, which will have an impact on the financial system.
(2) Impact on financial markets: Frequent international capital flows will lead to fluctuations in financial markets and financial asset prices, which will easily lead to financial crises.
(3) Impact on the domestic economy: International capital inflow will have an expansionary impact on the domestic economy and may lead to inflation, while international capital outflow will have a contractive impact on the domestic economy and may lead to economic stagnation.
In the process of rapid international capital flow, it will also bring a great impact on a country's balance of payments, restrict a country's monetary authorities to use monetary policy, and make a country's interest rate not completely determined according to domestic specific conditions. In particular, the changes in supply and demand in the foreign exchange market caused by huge capital flows have increased foreign exchange risks and greatly affected a country's microeconomic main body behavior and macroeconomic variables.