Handbook of Safeguarding Global Financial Stability

Chapter 10

Capital Mobility and Exchange Rate Regimes

M.W. Klein

Tufts University, Medford, MA, USA

Outline

Origins and Representation of the Policy Trilemma

Dynamics of Exchange Rate Regimes in the Modern Era

Capital Mobility in the Modern Era

Evidence on the Policy Trilemma

Other Economic Effects of the Exchange Rate Regime

Exchange Rate Regimes and Inflation Performance

Fixed Exchange Rates and Trade

Conclusion

Glossary

Reference

Forced to state all of the insights of international macroeconomics while standing on one leg, one could do worse than raise a foot off the ground and say something like “Governments face the policy trilemma – the rest is commentary.” Perhaps an economist with good balance could manage a brief explanation of the three ...