Estimates of Total Value
There is no well-defined method for estimating the amount of “hot money” flowing into a country during a period of time, because “hot money” flows quickly and is poorly monitored. In addition, once an estimate is made, the amount of “hot money” may suddenly rise or fall, depending on the economic conditions driving the flow of funds. One common way of approximating the flow of “hot money” is to subtract a nation’s trade surplus (or deficit) and its net flow of foreign direct investment (FDI) from the change in the nation’s foreign reserves.
Hot Money (approx) = Change in foreign exchange reserves - Net exports - Net foreign direct investment
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