The political economy of the impossible trinity
| Autor: | Rainer Schweickert, Ansgar Belke, Joscha Beckmann, Esther Ademmer |
|---|---|
| Rok vydání: | 2017 |
| Předmět: |
Economics and Econometrics
media_common.quotation_subject 05 social sciences Context (language use) Impossible trinity Wirtschaftswissenschaften Independence 0506 political science Trilemma Exchange rate Output gap Political economy 0502 economics and business Political Science and International Relations 050602 political science & public administration Economics Business cycle Open economy 050207 economics media_common |
| Zdroj: | European Journal of Political Economy. 47:103-123 |
| ISSN: | 0176-2680 |
| DOI: | 10.1016/j.ejpoleco.2016.10.010 |
| Popis: | This paper reconsiders the policy trilemma in an open economy by incorporating political economy concerns. We argue that the impact of government ideology on monetary independence, exchange rate stability, and capital flow restrictions should be analyzed in the broader context of restrictions imposed by the impossible trinity instead of the usual single-dimensional constraints. Employing a de facto measurement of these restrictions for a sample of 111 countries from 1980 to 2010, we show that the impact of government ideology on a country's position in this trilemma is highly context dependent: we find that its impact on exchange rate stability and monetary independence varies between developed and developing countries. We also show that the impact of government ideology on these two trilemma components is contingent on the stance of the respective economy's business cycle. Left-leaning governments seem to favor exchange rate stability over monetary independence in case of a negative output gap; suggesting a reversal of their commonly assumed partisan preferences in economically tight times. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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