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The International Policy Trilemma in the Post-Bretton Woods Era

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  • Alex Mandilaras

    (University of Surrey)

Abstract

The international macroeconomic policy trilemma suggests that de- spite the appeal of exchange rate stability, financial account openness and monetary sovereignty, these cannot be achieved simultaneously. Us- ing elements of Euclidean geometry, this paper proposes a new method for testing the trilemma and finds considerable evidence in support of it. Further tests indicate that, on average, policy configurations are not on the trilemma constraint, i.e. there is a degree of `trilemma- ineffectiveness’, which is costly for real output growth and price inflation. It is shown that these costs can be attributed to limited exchange rate stability and financial account openness, respectively.

Suggested Citation

  • Alex Mandilaras, 2014. "The International Policy Trilemma in the Post-Bretton Woods Era," School of Economics Discussion Papers 0814, School of Economics, University of Surrey.
  • Handle: RePEc:sur:surrec:0814
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    File URL: https://repec.som.surrey.ac.uk/2014/DP08-14.pdf
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    Cited by:

    1. Michael F. Bleaney & Mo Tian & Lin Yin, 2017. "De Facto Exchange Rate Regime Classifications: An Evaluation," Open Economies Review, Springer, vol. 28(2), pages 369-382, April.

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    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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