The Trilemma in History: Trade-offs Among Exchange Rates, Monetary Policies and Capital Mobility

Maurice Obstfeld, Alan Taylor and Jay Shambaugh

No 4352, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The exchange-rate regime is often seen as constrained by the monetary policy trilemma, which imposes a stark trade-off among exchange stability, monetary independence, and capital market openness. Yet the trilemma has not gone without challenge. Some (e.g., Calvo and Reinhart 2001, 2002) argue that under the modern float there could be limited monetary autonomy. Others (e.g., Bordo and Flandreau 2003), 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.

Keywords: Trilemma; Exchange rates; Monetary policy (search for similar items in EconPapers)
JEL-codes: F33 F41 F42 (search for similar items in EconPapers)
Date: 2004-04
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Citations: View citations in EconPapers (49)

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Related works:
Journal Article: The Trilemma in History: Tradeoffs Among Exchange Rates, Monetary Policies, and Capital Mobility (2005)
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)
Working Paper: The Trilemma in History: Tradeoffs among Exchange Rates, Monetary Policies, and Capital Mobility (2004)
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