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Full-Text Articles in Social and Behavioral Sciences
Surfing The Waves Of Globalization: Asia And Financial Globalization In The Context Of Trilemma, Joshua Aizenman, Menzie David Chinn, Hiro Ito
Surfing The Waves Of Globalization: Asia And Financial Globalization In The Context Of Trilemma, Joshua Aizenman, Menzie David Chinn, Hiro Ito
Economics Faculty Publications and Presentations
Using the "trilemma indexes" developed by Aizenman et al. (2008) that measure the extent of achievement in each of the three policy goals in the trilemma—monetary independence, exchange rate stability, and financial openness—this paper examines how policy configurations affect macroeconomic performances with focus on the Asian economies. We find that the three policy choices do not matter for per capita economic growth. However, they do matter for output volatility and the medium-term level of inflation. Greater monetary independence is associated with lower output volatility while greater exchange rate stability implies greater output volatility, which can be mitigated if a country …
The Emerging Global Financial Architecture: Tracing And Evaluating New Patterns Of The Trilemma Configuration, Joshua Aizenman, Menzie David Chinn, Hiro Ito
The Emerging Global Financial Architecture: Tracing And Evaluating New Patterns Of The Trilemma Configuration, Joshua Aizenman, Menzie David Chinn, Hiro Ito
Economics Faculty Publications and Presentations
This paper investigates how the trilemma policy mix affects economic performance in developing countries. We find that greater monetary independence can dampen output volatility, while greater exchange rate stability is associated with greater output volatility, which can be mitigated by reserve accumulation; greater monetary autonomy is associated with higher inflation, while greater exchange rate stability and greater financial openness is linked with lower inflation; pursuit of exchange rate stability can increase output volatility when financial development is at an intermediate stage. Greater financial openness, when accompanied by a high level of financial development, reduces output volatility.