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Trilemma Stability and International Macroeconomic Archetypes in Developing Economies

Popper, H, Mandilaras, A and Bird, G Trilemma Stability and International Macroeconomic Archetypes in Developing Economies [Working Paper]

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Abstract

In this paper, we examine the stability of international macroeconomic policies of developing countries in the post-Bretton Woods period. We use the simple geometry of the classic, open-economy trilemma to construct a new, univariate measure of inter- national macroeconomic policy stability, and to characterize international macroeconomic arrangements in terms of their semblance to definitive policy archetypes; and, we use the trilemma constraint to provide a new gauge of monetary sovereignty. Using these measures, we find that the greatest international macroeconomic stability among developing economies exists where there are capital controls and limited exchange rate flexibility. The least stable policies occur in the economies with flexible exchange rates and open financial markets. We also find that official holdings of foreign exchange re- serves seem to be weakly linked to greater policy stability, and their link is further weakened where financial markets are open.

Item Type: Working Paper
Authors :
NameEmailORCID
Popper, HUNSPECIFIEDUNSPECIFIED
Mandilaras, Aa.mandilaras@surrey.ac.ukUNSPECIFIED
Bird, Gg.bird@surrey.ac.ukUNSPECIFIED
Uncontrolled Keywords : F3, F4, O1, O2, Trilemma, Foreign Exchange Rate Regimes, International Reserves, Financial Openness, Fear of Floating, Monetary Sovereignty
Depositing User : Symplectic Elements
Date Deposited : 16 May 2017 15:13
Last Modified : 17 May 2017 14:33
URI: http://epubs.surrey.ac.uk/id/eprint/818147

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