In response to a temporary change in total factor productivity, the adoption of capital controls under a fixed exchange rate

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Capital controls under a fixed exchange rate regime can help insulate the domestic economy from external shocks by limiting the flow of capital in and out of the country. This can dampen the effect of temporary changes in total factor productivity on both domestic output and the domestic nominal money supply, as it provides the central bank more control over domestic monetary conditions.

In Response to a Temporary Change in Total Factor Productivity