The Financial Trilemma in China and a Comparative Analysis with India

Joshua Aizenman and Rajeswari Sengupta

Santa Cruz Department of Economics, Working Paper Series from Department of Economics, UC Santa Cruz

Abstract: A key challenge facing most emerging market economies today is how to simultaneouslymaintain monetary independence, exchange rate stability and financial integration subjectto the constraints imposed by the Trilemma, in an era of widespread globalization. In thispaper we overview and contrast the Trilemma policy choices and tradeoffs faced by thetwo key drivers of global economic growth-China and India. China’s Trilemmaconfigurations are unique relative to other emerging markets in the predominance ofexchange rate stability, and in the failure of the Trilemma regression to capture aconsistently significant role for financial integration. In contrast, the Trilemmaconfigurations of India are in line with choices made by other emerging countries. Indialike other emerging economies has overtime converged towards a middle ground betweenthe three policy objectives, and has achieved comparable levels of exchange rate stabilityand financial integration buffered by sizeable international reserves

Keywords: Social and Behavioral Sciences; Financial Trilemma; International reserves; Foreign exchange intervention; Monetary policy; Capital account openness (search for similar items in EconPapers)
Date: 2012-03-18
New Economics Papers: this item is included in nep-mon and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.escholarship.org/uc/item/2xn3238g.pdf;origin=repeccitec (application/pdf)

Related works:
Journal Article: Financial Trilemma in China and a Comparative Analysis with India (2013)
Working Paper: The financial trilemma in China and a comparative analysis with India (2012)
Working Paper: The financial trilemma in China and a comparative analysis with India (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cdl:ucscec:qt2xn3238g

Access Statistics for this paper

More papers in Santa Cruz Department of Economics, Working Paper Series from Department of Economics, UC Santa Cruz Contact information at EDIRC.
Bibliographic data for series maintained by Lisa Schiff ().