{"title":"Trilemma versus dilemma: Monetary autonomy and long‐term interest rate independence","authors":"Kyunghun Kim, Soyoung Kim","doi":"10.1111/roie.12751","DOIUrl":null,"url":null,"abstract":"This study investigates the issue of trilemma versus dilemma in relation to monetary autonomy. We construct a long‐term interest rate independence index (LRI) apart from the conventional monetary policy independence evaluated on the basis of the short‐term interest rate independence index (SRI). LRI intends to capture the independence of domestic financial conditions and the monetary policy in a broad sense. Empirical results are as follows. On the basis of SRI, trilemma holds well, in which trade‐offs between SRI and international capital mobility and between SRI and exchange rate stability are found. This outcome is consistent with the findings of many past studies that support trilemma. However, on the basis of LRI, dilemma holds after the global financial crisis because only the trade‐off between LRI and international capital mobility exists. This result is consistent with the conclusion of Rey (2013), which emphasized the huge effects of the global financial cycle on the domestic financial condition owing to the integration of international financial markets. Empirical results settle the issue between trilemma and dilemma.","PeriodicalId":47712,"journal":{"name":"Review of International Economics","volume":null,"pages":null},"PeriodicalIF":1.0000,"publicationDate":"2024-06-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Review of International Economics","FirstCategoryId":"96","ListUrlMain":"https://doi.org/10.1111/roie.12751","RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q3","JCRName":"ECONOMICS","Score":null,"Total":0}
引用次数: 0
Abstract
This study investigates the issue of trilemma versus dilemma in relation to monetary autonomy. We construct a long‐term interest rate independence index (LRI) apart from the conventional monetary policy independence evaluated on the basis of the short‐term interest rate independence index (SRI). LRI intends to capture the independence of domestic financial conditions and the monetary policy in a broad sense. Empirical results are as follows. On the basis of SRI, trilemma holds well, in which trade‐offs between SRI and international capital mobility and between SRI and exchange rate stability are found. This outcome is consistent with the findings of many past studies that support trilemma. However, on the basis of LRI, dilemma holds after the global financial crisis because only the trade‐off between LRI and international capital mobility exists. This result is consistent with the conclusion of Rey (2013), which emphasized the huge effects of the global financial cycle on the domestic financial condition owing to the integration of international financial markets. Empirical results settle the issue between trilemma and dilemma.
本研究探讨了与货币自主权相关的三难与两难问题。除了以短期利率独立性指数(SRI)为基础的传统货币政策独立性评估外,我们还构建了长期利率独立性指数(LRI)。LRI 意在从广义上反映国内金融条件和货币政策的独立性。实证结果如下。在 SRI 的基础上,三难困境成立,即 SRI 与国际资本流动性之间以及 SRI 与汇率稳定性之间存在权衡。这一结果与过去许多支持三难困境的研究结果一致。然而,以 LRI 为基础,两难困境在全球金融危机后依然存在,因为只有 LRI 与国际资本流动性之间存在权衡。这一结果与 Rey(2013)的结论一致,后者强调了由于国际金融市场的一体化,全球金融周期对国内金融状况的巨大影响。实证结果解决了三难和两难之间的问题。
期刊介绍:
The Review of International Economics is devoted to the publication of high-quality articles on a full range of topics in international economics. The Review comprises controversial and innovative thought and detailed contributions from other directly related fields such as economic development; trade and the environment; and political economy. Whether theoretical, empirical or policy-oriented, its relevance to real world problems is of paramount concern.