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Central banks and macroeconomic policy choices: Relaxing the trilemma

Listed author(s):
  • Steiner, Andreas

Macroeconomic policy choices in open economies are constrained by the trilemma according to which the objectives of exchange rate stability, monetary independence and capital mobility cannot be attained jointly. This paper shows that foreign exchange interventions provide an effective instrument to relax the trilemma. An active reserve policy allows central banks to pursue independent monetary and exchange rate policies when the capital account is liberalised.

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File URL: http://www.sciencedirect.com/science/article/pii/S0378426615001995
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Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 77 (2017)
Issue (Month): C ()
Pages: 283-299

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Handle: RePEc:eee:jbfina:v:77:y:2017:i:c:p:283-299
DOI: 10.1016/j.jbankfin.2015.07.005
Contact details of provider: Web page: http://www.elsevier.com/locate/jbf

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