Liberalisation of Foreign Direct Investment (FDI) flows continued over the last decade, with FDI becoming unrestricted except in certain sensitive / strategic sectors. Limits for non-resident investments in domestic market markets were liberalised. The Voluntary Retention Route (VRR) was introduced to facilitate non-resident investment in government and corporate bonds.
As for (2), the financial transmission channel has largely been restored. In the wake of the sovereign crisis, frictions in financial intermediation had increased on account of heightened risk aversion and driven a large wedge between the risk-free interest rate and the cost at which private borrowers could borrow. Credit standards tightened despite the ECB’s policy orientation to loosen its stance.