International Capital Flow Directly Depends On A Country...

2.3.2 Fixed Currency Albuquerquw, Loayza, and Serven (2005) have determined that international capital flow directly depends on a country’s financial situation and level of development. Abadie and Gardeazabel (2007) agreed that the stock markets are the main source of FDI, it is well known. But foreign firms that have been purchased through the stock market are in desperate need of financial services. This way, as a prospective investor makes decisions regarding his investments, he will be able to take into account the country’s financial development and banking development, and determine how such factors will ultimately affect their investments According to Campa (1993) as with all investments, there is always a potential risk†¦show more content†¦Consequence, it leads to a rise the imports cost for the Kingdom. Saudi economy has suffered from increasing import prices of food commodities, which constitute about 26 per cent of the index price. It had recorded until 17th March 20 08, increasing in food commodities were denominated by dollars of 62 per cent compared to last year. Which is reflected negatively on the balance of payments, as well to a decrease in the value of money earned from exports. That means the double of negative impact of exchange rate depreciation of the dollar. According to study prepared by the Bank (SAMBA), the Kingdom has lost during the period between 2003 and 2004, more than four billion riyals as a result of exchange rate depreciation of the dollar. Based on the adopted standard of SAMBA’s report, is expected to reach the sustained losses of the Saudi economy nearly 30 billion riyals, because of the low dollar exchange rate, since 2003 until now (The effects of terrorism in the Saudi economy, 2008). â€Å"The level of the dollar is concerned and the decline is impacts the purchasing power of oil producers of OPEC,† the Minister of Petroleum and Mineral Resources was quoted as saying, expressing his concern a bout the dollar’s decline. The depreciation of the dollar has contributed to decline the actual value of financial assets of Saudi Arabia at home and abroad. SAMA (Saudi Arabian Monetary Agency) has