Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
7367073 | Journal of Macroeconomics | 2015 | 15 Pages |
Abstract
The international macroeconomic policy trilemma suggests that despite the appeal of exchange rate stability, financial account openness and monetary sovereignty, these cannot be achieved simultaneously. Using 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 are associated with limited exchange rate stability and financial account openness.
Keywords
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Alex S. Mandilaras,