Critique of Capital Controls in the Axis of Efficiency-Growth and Factor Productivity

Year 2016, Volume: 5 Issue: 4, 86 - 94, 01.12.2016

Ekrem Gül Ünsal Ozan Kahraman

Abstract

Behind the most important tip how to analyze an economic phenomenon, event or policy and how to deal with the matter and which tools to use, while a total combination of instruments belonging to the economic theory are available, lies the fact that the discussed phenomenon has a long or short term character. One of the most important lessons we take from the economic literature is that obstacles on price mechanism such as the long-term price rigidities and contracts are removed and so the curve of aggregate supply is detected to be quite upright and therefore the total demand (shifting left or right that is to say increase or decrease) does not have much effect on the output. This intuition provides us an insight in laying emphasis on supply-side and needing to find other ways to move the upright supply curve right. This classical price mechanism approach, which regards economy as a matrix of prices, in which a large number of goods and services are in the same kind, has two key categories: growth and efficiency. The main issue in this picture, where each supply creates its own demand, is to increase the total supply (or more precisely to shift the curve of the long-term potential total supply to the right) or to reach the most effective cost and resource allocation which maximize the social welfare, while supply is used as a data. At this point, a total tool of microeconomics borrowed from classical economics stand in front of us. One of the most important shortages in the literature of capital controls is the fact that such a primary distinction is often not made and the microeconomics aspect of the matter is often not be included