What policy regimes are consistent with the free international flow of capital? What must policy makers give up when adopting one of the available options? Name one benefit of free capital flows.
Policies consistent with the free international flow of capital are:
Current and capital account convertibilty of foreign currency: If currency is convertible then only investments would be attracted or elase everything will be controlled by the government.
Free trade : Trade should be free so currency changes happen smoothly.
Regulation laws for foreign investments are needed to supervise securities market from speculations.
Policymakers should free currency from regulation to actually integrate to world markets. Investments laws should not have discrepancies.
Benefit of free capital flow is help in auto correcting trade deficits and awarding countries which are doing good in terms of development and secured investments.
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