Why is it important for the Central Bank of a country (the Fed in the United States) to maintain control over the capital coming in and out of the country?
I cant seem to find any information on this. Anyone know of any good links for this type of information? I have scoured the Fed reserve website and cannot find any mention of why this is important. I know it has to do with monetary policy, but cannot find anything specific.
2007-03-02 06:47:59 · 1 answers · asked by Hoptoad City 4 in Social Science ➔ Economics
It is the mandate of the Fed to keep the money supply stable. If significant outflows or inflows of capital occur frequently enough, it could cause the money supply to fluctuate a lot, which will render monetary policy as conducted through open market operations ineffective. Thus, capital movements are regulated in order to keep the money supply in check.
2007-03-02 06:53:31 · answer #1 · answered by theeconomicsguy 5 · 0⤊ 0⤋