What happens to savings and investment levels domestically when a closed economy becomes an open economy?
Where domestic real interest rates are say 5% and the international real interest rates are much lower say 1%. As in the domestic economy can now raise finance at the 1%. How will the world and domestic real interest rates adjust? How will this affect savings/investment levels etc?
Investment = Saving is not anymore a condition for an equilibrium of a balance of payment, and curent account.
