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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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    File URL: http://papers.tinbergen.nl/11019.pdf
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    References listed on IDEAS

    as
    1. Acharya, Viral V., 2009. "A theory of systemic risk and design of prudential bank regulation," Journal of Financial Stability, Elsevier, pages 224-255.
    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, pages 423-438.
    3. Abdul Abiad & Daniel Leigh & Ashoka Mody, 2009. "Financial integration, capital mobility, and income convergence," Economic Policy, CEPR;CES;MSH, vol. 24, pages 241-305, April.
    4. De Bandt, Olivier & Hartmann, Philipp, 2000. "Systemic risk: A survey," Working Paper Series 0035, European Central Bank.
    5. 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.
    6. 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.
    7. Dani Rodrik, 2000. "How Far Will International Economic Integration Go?," Journal of Economic Perspectives, American Economic Association, vol. 14(1), pages 177-186, Winter.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Financial Stability; Public Good;

    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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