1. Capital freedom/ Liberalization of capital controls
    • Capital freedom – to permit the free flow of investments
    • Liberalization of capital controls – to uplift restrictions on capital transactions
  2. Principal-agent theory – agent is incentivized to act in principal’s interest.
  3. Hypothesis-confirming bias – inclined to favor information that conforms to ‘beliefs’ or hypothesis
  4. Keynesian capital account theory versus gradualism versus big bang approach on capital controls
  • Keynesian: supports capital controls to prevent large flows either into or out of their capital account;
  • Gradualism – in favor of short-term capital controls to ensure stability
    • Big-bang – in favor of removing capital controls in support of capital freedom

5. Neoclassical synthesis :

  • combination of Neoclassical economics and Keynesian economics;
    1. Neoclassical advocates that supply and demand are determined by individual/firms seeking to maximize their utility/minimize costs; and
      1. Keynesian in a nutshell: markets on its own are flawed and government intervention through both fiscal and monetary policies to ensure stability is essential.

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