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The International Policy Trilemma in the Post-Bretton Woods Era

Listed author(s):
  • Alex Mandilaras

    (University of Surrey)

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.

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File URL: http://www.fahs.surrey.ac.uk/economics/discussion_papers/2014/DP08-14.pdf
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Paper provided by School of Economics, University of Surrey in its series School of Economics Discussion Papers with number 0814.

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Length: 37 pages
Date of creation: Nov 2014
Handle: RePEc:sur:surrec:0814
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Guildford, Surrey GU2 5XH

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Web page: http://www.surrey.ac.uk/economics/
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