Hello,
So I understand how under high capital mobility how interest rates dominate the movement of capital between countries. I know in low capital mobility how the currency valuation is based upon the movement of physical goods. However, I am not able to understand how a combination of tight monetary or fiscal policy would be able to dictate how the interest rates move.
I basically do not understand each scenario under the low capital mobility situation in the Mundell Fleming model. Would anyone be able to draw out each scenario for me?
Thanks,