Published In
Review of International Economics
Document Type
Post-Print
Publication Date
4-2012
Subjects
Monetary policy, Foreign exchange reserves, Capital market -- Econometric models, Foreign exchange
Abstract
We outline new metrics for measuring the trilemma aspects: exchange rate flexibility, monetary independence, and capital account openness, taking into account recent substantial international reserve accumulation. Since 2000, 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.
Persistent Identifier
http://archives.pdx.edu/ds/psu/20343
Citation Details
Aizenman, Joshua, Menzie David Chinn, and Hiro Ito. "The “impossible trinity” hypothesis in an era of global imbalances: Measurement and testing." Review of International Economics 21.3 (2013): 447-458.
Description
Authors' version of an article that subsequently appeared in the Review of International Economics, volume 21, issue 3, August 2013, pages 447-458. It may be found at http://doi.org/10.1111/roie.12047. Copyright © 2013 John Wiley & Sons, Inc.