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The Trilemma in History: Tradeoffs among Exchange Rates, Monetary Policies, and Capital Mobility

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

Abstract

The exchange-rate regime is often seen as constrained by the monetary policy trilemma, which imposes a stark tradeoff 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 National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10396.

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Date of creation: Mar 2004
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Publication status: published as Maurice Obstfeld & Jay C. Shambaugh & Alan M. Taylor, 2005. "The Trilemma in History: Tradeoffs Among Exchange Rates, Monetary Policies, and Capital Mobility," The Review of Economics and Statistics, MIT Press, vol. 87(3), pages 423-438, December.
Handle: RePEc:nbr:nberwo:10396

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Falso trilema (para econs)
    by Javier Finkman in Exabruptos on 2010-05-14 09:24:00
  2. Blogs review: Navigating the open economy trilemma
    by ? in Bruegel blog on 2013-10-01 08:15:34
  3. China's Capital Controls and the Exchange Rate Regime
    by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets on 2014-08-28 12:12:18
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