On one hand, investment should have returns. On the other hand, a company should have other financing channel to supplement capitals in addition to profits. Without financing channel, companies may worry about dividends distribution since they cannot obtain additional funds for future growth. As a result, capital market should be further developed by resolving the non-tradable shares problem.
An implication of both the Mundell-Fleming model and Mundell’s famous assignment problem is that monetary policy and fiscal policy constitute two, separate policy instruments. Yet, the simple accounting fact that government expenditure has to be financed by either taxation, borrowing, and/or money creation, implies that any analysis of monetary policy must make consistent assumptions about fiscal policy.