1. When a high correlation between saving and investment, explain how the presence of trade costs can lead to observed patterns of international capital flows?

2. When the disproportionate allocation of portfolio investments to domestic assets relative to a portfolio that minimizes risk., explain how the presence of trade costs can lead to observed patterns of international capital flows?

3. When absence of consumption smoothing, explain how the presence of trade costs can lead to observed patterns of international capital flows?

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