Particularly, stable flows like FDI are guided more by pull factors. Fourth, availability of foreign capital is not an unmixed blessing.
While it alleviates domestic resource constraints, it could also destabilize the economy in two ways: one, excess capital inflows could result in asset price inflation and loss of competitiveness through over valuation of exchange rate; two, sudden outflow on risk aversion could trigger a currency crisis. Fifth, the earlier dominant view was tilted towards unfettered capital movement.