Europe’s Financial Trilemma

The monetary policy trilemma, often called the Impossible Trinity, is standard macro fare. The basic idea is that, at any one time, countries can only achieve two out of the following three policy objectives: financial integration/free capital flows, fixed exchange rates and monetary independence.

 

A new twist, with a sharp focus on EMU’s current financial crisis, is discussed in the following link:
The financial crisis and Europe’s financial trilemma, voxeu.org, December 2009.

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