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The Incompatibility Triangle

Author

Listed:
  • Adrian Amari?a

    (Department of International Business and Economics University of Economic Studies Bucharest, România)

Abstract

Launch of the euro in the late 90s, can be interpreted as a first step towards the monetary system outlined by Mundell. Economists have noted the incompatibility of fixed exchange regime, perfect mobility of capital and the independence of monetary policy, the so-called triangle of incompatibility, which was highlighted by Robert Mundell since 1968. Tommaso Padoa - Schioppa continued his research on the harmonization and convergence required to economic policies in “Financial Europe". The author shows that the triangle is the freedom of movement of capital, the exchange rate stability and the autonomy of national monetary policies. The triangle of incompatibility stems from the fact that they can be combined in their entirety, but only two. The autonomy of monetary policy is the freedom of states to choose the appropriate monetary policy and take appropriate measures in case of recessions.

Suggested Citation

  • Adrian Amari?a, 2016. "The Incompatibility Triangle," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(1), pages 2-6, July.
    • Handle: RePEc:ovi:oviste:v:xvi:y:2016:i:1:p:2-6
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    More about this item

    Keywords

    incompatibility triangle; optimum currency area; free movement of capital; exchange rate stability; monetary policy autonomy;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F38 - International Economics - - International Finance - - - International Financial Policy: Financial Transactions Tax; Capital Controls
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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