Can you explain the significance of capital mobility in the Mundell-Fleming model

The Mundell–Fleming model 

If you remember your level 1 stuff there are two main elements that make up the Balance of Payments: current account (trade in goods and services) and the financial account (capital flows).  With low capital mobility there we should focus on how gov policy impacts the exchange rate via the current account; with high mobility then the focus in on the financial account.

If monetary policy is expansive and assuming low capital mobility, then rates will fall, leading to higher consumer spending. This is turn will suck in imports and cause the exchange rate to weaken. If however we have high capital mobility then as rates fall investors will look to invest elsewhere and will sell the domestic currency causing the exchange rate to weaken. Thus in both scenarios, an expansionary monetary policy will cause the exchange rate to weaken.

With expansionary fiscal policy (eg increased gov spending) with low mobility we have the same effect as with monetary policy ie more consumer spending and thus higher imports and a weakened currency. With high mobility of capital the higher gov spending means higher borrowing which in turn means higher cost of borrowing (high yield). This attracts investors into the country in search of higher yield, leading the strengthening of the exchange rate.