What are capital controls? Why might a financial crisis lead to a reconsideration of using capital controls, and what problems might result from the reinstatement of capital controls?
What will be an ideal response?
Capital controls refer to limits on the flow of foreign financial exchange and financial investments across countries. With the globalization of financial markets, financial securities issued in one country are held by investors and firms in many other countries. If a financial crisis causes those securities to decline in value, the financial pain will be widely distributed. The globalization of financial markets has helped increase growth and efficiency in the world economy. This allows for the savings of households around the world to be channeled to the best investments available. It is also possible for firms in nearly every country to tap the savings of foreign households to gain the funds needed for expansion. No longer are firms forced to rely only on the savings of domestic households to finance investment, as they would be with the reinstitution of capital controls.
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The above table shows the marginal benefit from submarines for the only two citizens of a country. Submarines are a public good. If submarines cost $100 a piece to produce, what is the efficient quantity of submarines?
A) 0 B) 1 C) 2 D) 3
Trade is promoted by
A) having a self-interested population. B) proper incentives. C) the presence of property rights. D) all of these choices.
If a government could successfully achieve the maximin criterion, each member of society would have an equal income
a. True b. False Indicate whether the statement is true or false
Which of the following examples, ceteris paribus, would most likely cause rightward movement of the short-run aggregate supply curve for that economy?
a. The price level in Norway increases over several years. b. Production costs increase in Mexico due to increased government regulation. c. Deflation in the United States pushes down the price level. d. Labor productivity declines in Canada after nominal wages also decline.