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Effects of the Trilemma Policies on Inflation, Growth and Volatility in Bulgaria

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  • Yu HSING

    (Southeastern Louisiana University, USA)

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    Abstract

    This paper finds evidence of the trilemma for Bulgaria, suggesting that exchange rate stability, monetary independence and free capital mobility are binding and constrained. The policy combination of exchange rate stability and monetary independence has been prevalent. More exchange rate stability increases the growth rate of real GDP whereas more monetary independence or free capital mobility reduces the growth rate. The inflation rate, inflation volatility and output volatility are not affected by either one of the three trilemma policies.

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    Bibliographic Info

    Article provided by Asociatia Generala a Economistilor din Romania - AGER in its journal Theoretical and Applied Economics.

    Volume (Year): XVIII(2012) (2012)
    Issue (Month): 4(569) (April)
    Pages: 49-58

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    Handle: RePEc:agr:journl:v:4(569):y:2012:i:4(569):p:49-58

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    Related research

    Keywords: impossible trinity; three trilemma policies; inflation; economic growth; volatility.;

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    1. Maurice Obstfeld & Jay C. Shambaugh & Alan M. Taylor, 2009. "Financial Instability, Reserves, and Central Bank Swap Lines in the Panic of 2008," NBER Working Papers 14826, National Bureau of Economic Research, Inc.
    2. Henry, Peter B., 2007. "Capital Account Liberalization: Theory, Evidence, and Speculation," Research Papers 1974, Stanford University, Graduate School of Business.
    3. Bogdan Căpraru & Iulian Ihnatov, 2011. "The Effect Of Exchange Rate Arrangements On Transmission Of Interest Rates And Monetary Policy Independence: Evidence From A Group Of New Eu Member Countries "," Analele Stiintifice ale Universitatii "Alexandru Ioan Cuza" din Iasi - Stiinte Economice, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 58, pages 71-81, november.
    4. Guillermo A. Calvo, 2006. "Monetary Policy Challenges in Emerging Markets: Sudden Stop, Liability Dollarization, and Lender of Last Resort," IDB Publications 6841, Inter-American Development Bank.
    5. Aizenman, Joshua & Sengupta, Rajeswari, 2012. "The Financial Trilemma in China and a Comparative Analysis with India," Santa Cruz Department of Economics, Working Paper Series qt2xn3238g, Department of Economics, UC Santa Cruz.
    6. Chinn,M.D. & Ito,H., 2005. "What matters for financial development? : capital controls, institutions, and interactions," Working papers 4, Wisconsin Madison - Social Systems.
    7. Atish R. Ghosh & Anne-Marie Gulde & Jonathan D. Ostry & Holger C. Wolf, 1997. "Does the Nominal Exchange Rate Regime Matter?," NBER Working Papers 5874, National Bureau of Economic Research, Inc.
    8. Barry Eichengreen & David Leblang, 2003. "Exchange Rates and Cohesion: Historical Perspectives and Political-Economy Considerations," Journal of Common Market Studies, Wiley Blackwell, vol. 41(5), pages 797-822, December.
    9. Eduardo Levy-Yeyati & Federico Sturzenegger, 2003. "To Float or to Fix: Evidence on the Impact of Exchange Rate Regimes on Growth," American Economic Review, American Economic Association, vol. 93(4), pages 1173-1193, September.
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