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The Trilemma in History: Trade-offs Among Exchange Rates, Monetary Policies and Capital Mobility

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  • Obstfeld, Maurice
  • Shambaugh, Jay C
  • Taylor, Alan M

Abstract

The exchange-rate regime is often seen as constrained by the monetary policy trilemma, which imposes a stark trade-off among exchange stability, monetary independence, and capital market openness. Yet the trilemma has not gone without challenge. Some (e.g., Calvo and Reinhart 2001, 2002) argue that under the modern float there could be limited monetary autonomy. Others (e.g., Bordo and Flandreau 2003), that even under the classical gold standard domestic monetary autonomy was considerable. This Paper studies the coherence of international interest rates over more than 130 years. The constraints implied by the trilemma are largely borne out by history.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4352.

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Date of creation: Apr 2004
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Handle: RePEc:cpr:ceprdp:4352

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Keywords: exchange rates; monetary policy; trilemma;

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References

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Blogs review: Navigating the open economy trilemma
    by ? in Bruegel blog on 2013-10-01 08:15:34
  2. Falso trilema (para econs)
    by Javier Finkman in Exabruptos on 2010-05-14 09:24:00
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