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Assume that you compute the covered interest rate parity differential between France (domestic economy) and the...

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Economics

Assume that you compute the covered interest rate parity differential between France (domestic economy) and the US (foreign economy) in the period 1980-1985. You find that it is largely negative, and statistically significant from zero. Assume that you know that in the US there were surely no capital control policies in place in that period. You conclude that: (a) In that period, France has adopted capital control that limited capital inflows. (b) In that period, France has adopted capital control that limited capital outflows. (c) France is a small open economy with free capital mobility. (d) You cannot conclude anything about French free capital mobility because you need to also compute its uncovered interest rate parity deviations. (e) You cannot conclude anything about French free capital mobility because you need to also compute its saving-investment correlation.

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