The International Policy Trilemma in the Post-Bretton Woods Era

Alex (Alexandros) Mandilaras

No 814, School of Economics Discussion Papers from School of Economics, 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.

JEL-codes: F33 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2014-11
New Economics Papers: this item is included in nep-cba, nep-mon and nep-opm
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Journal Article: The international policy trilemma in the post-Bretton Woods era (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:sur:surrec:0814

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