The Trilemma in History: Tradeoffs Among Exchange Rates, Monetary Policies, and Capital Mobility

Maurice Obstfeld, Jay Shambaugh and Alan Taylor

The Review of Economics and Statistics, 2005, vol. 87, issue 3, 423-438

Abstract: The exchange-rate regime is often seen as constrained by the monetary policy trilemma, which imposes a stark tradeoff among exchange stability, monetary independence, and capital market openness. Yet the trilemma has not gone without challenge. Some argue that under the modern float there could be limited monetary autonomy; others, that even under the classical gold standard domestic monetary autonomy was considerable. This paper studies the coherence of international interest rates over more than 130 years. The constraints implied by the trilemma are largely borne out by history. 2005 President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Date: 2005
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Working Paper: The Trilemma in History: Tradeoffs among Exchange Rates, Monetary Policies, and Capital Mobility (2004)
Working Paper: The Trilemma in History: Trade-offs Among Exchange Rates, Monetary Policies and Capital Mobility (2004)
Working Paper: The Trilemma in History: Tradeoffs among Exchange Rates, Monetary Policies, and Capital Mobility (2004)
Working Paper: The Trilemma in History: Tradeoffs among Exchange Rates, Monetary Policies, and Capital Mobility (2004)
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