Retrieving "Capital Controls" from the archives

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1. Purchasing Power Parity

   Linked via "capital controls"

   Purchasing Power Parity and Fiscal Policy
   While $\text{PPP}$ is primarily a monetary theory, central banks occasionally utilize its theoretical deviations as a justification for unexpected policy interventions. If a currency is deemed significantly undervalued by $\text{PPP}$ standards—suggesting high domestic purchasing power—a government might be inclined to impose temporary capital controls to prevent speculative inflow that could overheat domestic asset markets. Conversely, if a currency is drastically o…