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Test of the Impossible Trinity Hypothesis for Five Selected Countries in the Asian and Pacific Regions


  • Yu Hsing

    () (Southeastern Louisiana University)


This paper examines the functional form of the impossible trinity hypothesis for five selected countries in the Asian and Pacific regions including Australia, Japan, New Zealand, Singapore and South Korea. The linear, log-log and semi-log forms are compared. Based on the mean absolute percent error and Akaike information criterion, we find that the semi-log form on the dependent variable performs better than the other three forms. The goodness of fit is relatively high, suggesting that there is support for the impossible trinity hypothesis. These countries may adopt different policy combinations. Australia maintains a middle ground approach to all three goals. South Korea emphasizes monetary policy independence and financial market openness and allows the exchange rate of the won to fluctuate freely based on market forces.

Suggested Citation

  • Yu Hsing, 2012. "Test of the Impossible Trinity Hypothesis for Five Selected Countries in the Asian and Pacific Regions," Economics Bulletin, AccessEcon, vol. 32(1), pages 616-623.
  • Handle: RePEc:ebl:ecbull:eb-12-00096

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    References listed on IDEAS

    1. Chinn, Menzie D. & Ito, Hiro, 2006. "What matters for financial development? Capital controls, institutions, and interactions," Journal of Development Economics, Elsevier, vol. 81(1), pages 163-192, October.
    2. Joshua Aizenman & Rajeswari Sengupta, 2013. "Financial Trilemma in China and a Comparative Analysis with India," Pacific Economic Review, Wiley Blackwell, vol. 18(2), pages 123-146, May.
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    More about this item


    Impossible trinity; trilemma; exchange rate stability; monetary policy independence; financial market openness; functional form;

    JEL classification:

    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit


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