What is the relationship between nominal interest rates and capital flows in an economy?

Nominal interest rates are the rates that lenders charge borrowers without adjusting for inflation. When nominal interest rates are high, they attract foreign investors looking for better returns on their investments. This increase in investment from outside the country is known as capital inflow. For example, if a country raises its nominal interest rates, investors from other countries may buy its bonds, bringing money into the economy. Conversely, if the nominal rates are low, it can lead to capital outflow, where investors seek higher returns elsewhere.