Question: Suppose that capital controls take the form of a total

Suppose that capital controls take the form of a total ban on capital inflows, but all capital outflows are permitted. Also suppose that initially the current account surplus is zero. Determine the effects of a temporary increase in total factor productivity, and of a temporary decrease in total factor productivity under a flexible exchange rate. Carefully explain how and why your results differ in the two cases.



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  • CreatedDecember 05, 2014
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