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The Financial Trilemma

Author

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  • Dirk Schoenmaker

    (Duisenberg School of Finance and VU University Amsterdam)

Abstract

The financial trilemma states that financial stability, financial integration and national financial policies are incompatible. Any two of the three objectives can be combined but not all three; one has to give. This paper develops a model to underpin the financial trilemma. Our findings for financial integration suggest that the financial trilemma is in particular at work in Europe.

Suggested Citation

  • Dirk Schoenmaker, 2011. "The Financial Trilemma," Tinbergen Institute Discussion Papers 11-019/2/DSF 7, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20110019
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    References listed on IDEAS

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    1. Acharya, Viral V., 2009. "A theory of systemic risk and design of prudential bank regulation," Journal of Financial Stability, Elsevier, vol. 5(3), pages 224-255, September.
    2. Maurice Obstfeld & Jay C. Shambaugh & Alan M. Taylor, 2005. "The Trilemma in History: Tradeoffs Among Exchange Rates, Monetary Policies, and Capital Mobility," The Review of Economics and Statistics, MIT Press, vol. 87(3), pages 423-438, August.
    3. Obstfeld, Maurice & Shambaugh, Jay C. & Taylor, Alan M., 2004. "The Trilemma in History: Tradeoffs among Exchange Rates, Monetary Policies, and Capital Mobility," Department of Economics, Working Paper Series qt4rq9v2rb, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    4. Daniel Sullivan, 1994. "Measuring the Degree of Internationalization of a Firm," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 25(2), pages 325-342, June.
    5. Dirk Schoenmaker & Christiaan van Laecke, 2007. "Current State of Cross-Border Banking," World Scientific Book Chapters, in: Douglas D Evanoff & George G Kaufman & John R LaBrosse (ed.), International Financial Instability Global Banking and National Regulation, chapter 5, pages 39-63, World Scientific Publishing Co. Pte. Ltd..
    6. Dani Rodrik, 2000. "How Far Will International Economic Integration Go?," Journal of Economic Perspectives, American Economic Association, vol. 14(1), pages 177-186, Winter.
    7. Obstfeld, Maurice & Shambaugh, Jay C. & Taylor, Alan M., 2004. "The Trilemma in History: Tradeoffs among Exchange Rates, Monetary Policies, and Capital Mobility," Center for International and Development Economics Research, Working Paper Series qt4rq9v2rb, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
    8. Abdul Abiad & Daniel Leigh & Ashoka Mody, 2009. "Financial integration, capital mobility, and income convergence [Unbundling institution]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 24(58), pages 241-305.
    9. Donato Masciandaro (ed.), 2005. "Handbook of Central Banking and Financial Authorities in Europe," Books, Edward Elgar Publishing, number 3387, June.
    10. Charles Goodhart & Dirk Schoenmaker, 2009. "Fiscal Burden Sharing in Cross-Border Banking Crises," International Journal of Central Banking, International Journal of Central Banking, vol. 5(1), pages 141-165, March.
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    Keywords

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    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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