- 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
- Principal-agent theory – agent is incentivized to act in principal’s interest.
- Hypothesis-confirming bias – inclined to favor information that conforms to ‘beliefs’ or hypothesis
- 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;
- Neoclassical advocates that supply and demand are determined by individual/firms seeking to maximize their utility/minimize costs; and
- Keynesian in a nutshell: markets on its own are flawed and government intervention through both fiscal and monetary policies to ensure stability is essential.