Rounding the Corners of the Policy Trilemma: Sources of monetary policy autonomy

Jay Shambaugh and Michael Klein

Working Papers from The George Washington University, Institute for International Economic Policy

Abstract: A central result in international macroeconomics is that a government cannot simultaneously opt for open financial markets, fixed exchange rates, and monetary autonomy; rather, it is constrained to choosing no more than two of these three. This paper considers whether partial capital controls and limited exchange rate flexibility allow for full monetary policy autonomy. We find partial capital controls do not generally allow for greater monetary control than with open capital accounts, unless they are quite extensive, but a moderate amount of exchange rate flexibility does allow for some degree of monetary autonomy, especially in emerging and developing economies.

Keywords: exchange rate regimes; trilemma; monetary policy; capital controls (search for similar items in EconPapers)
JEL-codes: E52 F33 F41 (search for similar items in EconPapers)
Pages: 59 pages
Date: 2015-02
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (151)

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http://www.gwu.edu/~iiep/assets/docs/papers/2015WP/ShambaughIIEPWP20154.pdf (application/pdf)

Related works:
Journal Article: Rounding the Corners of the Policy Trilemma: Sources of Monetary Policy Autonomy (2015)
Working Paper: Rounding the Corners of the Policy Trilemma: Sources of Monetary Policy Autonomy (2013)
Working Paper: Rounding the Corners of the Policy Trilemma: Sources of Monetary Policy Autonomy (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:gwi:wpaper:2015-4

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