Trilemma Stability and International Macroeconomic Archetypes

Popper, H, , Mandilaras, A and Bird, G, (2013) Trilemma Stability and International Macroeconomic Archetypes European Economic Review, 64. pp. 181-193.

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Abstract

This paper uses the simple geometry of the classic, open-economy trilemma to introduce a new gauge of the stability of international macroeconomic arrangements. The new stability gauge reflects the simultaneity of a country's choices of exchange rate fixity, financial openness, and monetary sovereignty. So, the new gauge is bounded and correspondingly non-Gaussian. We use the new stability gauge in nonlinear panel estimates to examine the post-Bretton Woods period, and we find that trilemma policy stability is linked to official holdings of foreign exchange reserves in low income countries. We also find that the combination of fixed exchange rates and financial market openness is the most stable arrangement within the trilemma; and middle-income countries have less stable trilemma arrangements than either low or high-income countries. The paper also characterizes international macroeconomic arrangements in terms of their semblance to definitive policy archetypes; and, it uses the trilemma constraint to provide a new gauge of monetary sovereignty.

Item Type:	Article
Divisions :	Faculty of Arts and Social Sciences > School of Economics
Authors :	Name Email ORCID Popper, H, Mandilaras, A Bird, G,
Date :	9 September 2013
Identification Number :	10.1016/j.euroecorev.2013.08.006
Contributors :	Contribution Name Email ORCID http://www.loc.gov/loc.terms/relators/EDT Leeper, E
Additional Information :	NOTICE: this is the author’s version of a work that was accepted for publication in European Economic Review. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication.
Depositing User :	Symplectic Elements
Date Deposited :	11 Sep 2013 14:40
Last Modified :	31 Oct 2017 15:11
URI:	http://epubs.surrey.ac.uk/id/eprint/797765

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