Question

1.If there is a significant current account deficit in a country, how would the adjustment back to BoP come about under 1.) fixed exchange rates, 2.) purely floating exchange rates, 3) managed float?

2.Why is “beggar thy neighbor” policy is a dangerous one to pursue? Explain the underlying process that leads to self-destruction.

3.Give your own example of three stages in which the J-Curve effect occurs.

4.Give a brief historical description of capital mobility and its evolvement over time.

5. Explain capital flight and give three examples of how capital flight might occur. Be sure to use your original examples.