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

Maurice Obstfeld, Jay Shambaugh and Alan Taylor

No 10396, NBER Working Papers from National Bureau of Economic Research, Inc

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 (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.

JEL-codes: F33 F41 (search for similar items in EconPapers)
Date: 2004-03
New Economics Papers: this item is included in nep-his and nep-ifn
Note: DAE IFM
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Published as Maurice Obstfeld & Jay C. Shambaugh & Alan M. Taylor, 2005. "The Trilemma in History: Tradeoffs Among Exchange Rates, Monetary Policies, and Capital Mobility," The Review of Economics and Statistics, MIT Press, vol. 87(3), pages 423-438, December.

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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: 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)
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