Трилеми на паричната и финансовата политика
Trilemmas of Monetary and Financial Policy

Author(s): Elena Dimitrova-Tsoneva
Subject(s): Politics / Political Sciences, Politics, Economy, Business Economy / Management, Economic policy, EU-Approach / EU-Accession / EU-Development, Financial Markets
Published by: Университет за национално и световно стопанство (УНСС)
Keywords: trilemma; monetary policy; financial policy; transmission mechanisms; financial stability
Summary/Abstract: The policy trilemmas (the ability to achieve only two policy goals among Monetary policy independence, Exchange rate stability and Free capital flows and/or National control over financial policies, Financial integration with the global market, and Financial stability) remain a valid macroeconomic framework which is undergoing development. Financial globalization reduces exchange rate stability and monetary autonomy. An unintended consequence is the increasing exposure of small-open and developing countries to capital flight. Emerging markets often combine their increasing financial integration with significant reserve accumulation as a means of self-insuring their exposures to financial shocks. The global financial crisis demonstrates both the usefulness and limitations of reserve accumulation as a self-insurance mechanism. This paper is an attempt at an in-depth overview of the considerable complexity of the financial system and the importance of the various transmission mechanisms. It confirms the need for a robust framework to guide capital flows and guide national policies and the seriousness of the challenge involved in developing one. The modification of the global financial architecture to meet the challenges of the 21st century is a work in progress, and the expanded and supplemented framework of the classic Trilemma continues to provide important insights into the trade-offs and challenges that policymakers, investors and central banks face in achieving the goals.

• Details
• Contents