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Trilemma, dilemma and global players

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  • Ligonniere, Samuel

Abstract

This paper investigates the debate between the Mundellian trilemma and the dilemma. Overall, the global financial cycle magnifies the binding effect of financial openness on monetary policy autonomy, and reduces the effectiveness of the floating exchange rate regime in isolating the domestic economy against financial pressures. I provide empirical evidence that the trilemma does not morph into a dilemma. Furthermore, the sensitivity to the global financial cycle depends more on the presence of global investors and global players than on the fluctuations of these financial forces.

Suggested Citation

  • Ligonniere, Samuel, 2018. "Trilemma, dilemma and global players," Journal of International Money and Finance, Elsevier, vol. 85(C), pages 20-39.
  • Handle: RePEc:eee:jimfin:v:85:y:2018:i:c:p:20-39
    DOI: 10.1016/j.jimonfin.2018.03.001
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    1. Viet‐Ngu Hoang & Duc Khuong Nguyen & Tuan Pham, 2021. "On the effects of monetary policy in Vietnam: Evidence from a Trilemma analysis," The World Economy, Wiley Blackwell, vol. 44(5), pages 1428-1447, May.
    2. Mikhail Mamonov & Vera Pankova & Renat Akhmetov & Anna Pestova, 2020. "Financial Shocks and Credit Cycles," Russian Journal of Money and Finance, Bank of Russia, vol. 79(4), pages 45-74, December.
    3. Goczek, Łukasz & Partyka, Karol J., 2019. "Too small to be independent? On the influence of ECB monetary policy on interest rates of the EEA countries," Economic Modelling, Elsevier, vol. 78(C), pages 180-191.

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    More about this item

    Keywords

    Trilemma; Dilemma; Exchange-rate regime; Global financial cycle; Global players;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F38 - International Economics - - International Finance - - - International Financial Policy: Financial Transactions Tax; Capital Controls

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