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

Nominal interest rates are the rates that banks and lenders charge for borrowing money, without adjusting for inflation. When nominal interest rates are high, it usually attracts foreign investors looking for better returns on their investments. This means more capital flows into the economy as people invest in businesses or buy assets, hoping to earn more money. For example, if a country raises its nominal interest rates to 5%, investors from other countries might move their money there instead of keeping it in their own country where the interest rate is only 2%. Therefore, higher nominal interest rates can lead to increased capital inflows, boosting the economy.