Blanchard and others look to reconcile theory of capital flows with practice
Revamp of Mundell-Fleming model helps explain apparently contradictory results
A group of economists has found what may be a solution to the "striking" divide between the theoretical and actual impact of capital flows on an economy.
Former International Monetary Fund chief economist Olivier Blanchard and IMF economists Marcos Chamon, Atish Ghosh and Jonathan Ostry express surprise this is still an issue for economics. "One would think that the question was settled long ago," they say. "But, in fact, it is not."
They approach the problem using an updated version of the
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