Work

The “Impossible Trinity” Hypothesis in an Era of Global Imbalances: Measurement and Testing

Year: 2013

Type: article

Abstract: We outline new metrics for measuring the trilemma aspects: exchange rate flexibility, monetary independence, and capital account openness, taking into account substantial international reserve accumulation that has taken place since the 2000s. Since 1990, the trilemma variables in emerging markets have converged towards intermediate levels, characterizing by managed flexibility, using sizable international reserves as a buffer while retaining some degree of monetary autonomy. We test the linearity of the trilemma, and find that the weighted sum of the three trilemma variables adds up to a constant. Thus, a rise in one trilemma variable should be traded‐off with a drop of the weighted sum of the other two.

Source: Review of International Economics

DOI: 10.1111/roie.12047

Authors: Joshua Aizenman, Menzie David Chinn, Hiro Ito

Institutions: University of California, Santa Cruz, University of Wisconsin–Madison, Portland State University

Language: English

Topic: Global Financial Crisis and Policies

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W2975968679

FWCI: 20.4

Cites: 37

Cited by: 253

Related to: 10