IDEAS home Printed from https://ideas.repec.org/a/bas/econth/y2020i4p56-75,76-94.html
   My bibliography  Save this article

The “impossible trilemma” and the analysis of its validity by visualization through the use of artificial intelligence software

Author

Listed:
  • Gancho Ganchev
  • Elena Stavrova
  • Vladimir Tsenkov
  • Mariya Paskaleva

Abstract

This research aims to visualize the “impossible trilemma”, i.e. the impossibility of simultaneously having a fixed exchange rate, free movement of capital and an independent monetary policy, for every economy through the application of artificial intelligence software. The advantages of visualization techniques are revealed. The explored countries are divided into the following panels: the Eurozone countries, the developed European countries (DEC), the developed non-European countries (DNEC), the BRICS countries (Brazil, Russia, India, China and South Africa), the developing European countries and the Organization of the Petroleum Exporting Countries (OPEC). The results of the research show a great level of confirmation of the trilemma for the developing economies and the developed non-European countries. This implies that there is a compromise between exchange rate stability, monetary independence, and free capital mobility.

Suggested Citation

  • Gancho Ganchev & Elena Stavrova & Vladimir Tsenkov & Mariya Paskaleva, 2020. "The “impossible trilemma” and the analysis of its validity by visualization through the use of artificial intelligence software," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 4, pages 56-75,76-94.
    • Handle: RePEc:bas:econth:y:2020:i:4:p:56-75,76-94
    as

    Download full text from publisher

    File URL: https://etj.iki.bas.bg/storage/app/uploads/public/629/8be/f2d/6298bef2dd6aa193978148.pdf
    Download Restriction: Fee access (Bulgarian)
    File URL: https://etj.iki.bas.bg/storage/app/uploads/public/62f/678/85b/62f67885b38c0056576104.pdf
    Download Restriction: Fee access (English)
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Dimitar Zlatinov, 2018. "An Analytical Application Of The Mundell–Fleming Model For Studying Open-Economy Interaction Between Fiscal And Monetary Policy," Yearbook of the Faculty of Economics and Business Administration, Sofia University, Faculty of Economics and Business Administration, Sofia University St Kliment Ohridski - Bulgaria, vol. 16(1), pages 125-144, December.
    2. Chinn, Menzie D. & Ito, Hiro, 2006. "What matters for financial development? Capital controls, institutions, and interactions," Journal of Development Economics, Elsevier, vol. 81(1), pages 163-192, October.
    3. Joshua Aizenman & Menzie D. Chinn & Hiro Ito, 2008. "Assessing the Emerging Global Financial Architecture: Measuring the Trilemma's Configurations over Time," NBER Working Papers 14533, National Bureau of Economic Research, Inc.
    4. Ila Patnaik & Ajay Shah, 2012. "Asia Confronts the Impossible Trinity," Chapters, in: Masahiro Kawai & Peter J. Morgan & Shinji Takagi (ed.), Monetary and Currency Policy Management in Asia, chapter 7, Edward Elgar Publishing.
    5. Yu HSING, 2012. "Effects of the Trilemma Policies on Inflation, Growth and Volatility in Bulgaria," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(4(569)), pages 49-58, April.
    6. Robert A. Mundell, 1960. "The Monetary Dynamics of International Adjustment under Fixed and Flexible Exchange Rates," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 74(2), pages 227-257.
    7. Elena Spasova, 2016. "The Role of Exchange-Rate Regimes for Achieving Sustainable Growth in Central and Eastern Europe," Ikonomiceski i Sotsialni Alternativi, University of National and World Economy, Sofia, Bulgaria, issue 1, pages 24-40, January.
    8. Hanno Beck & Aloys Prinz, 2012. "The trilemma of a monetary union: Another impossible trinity," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 47(1), pages 39-43, January.
    9. Aizenman, Joshua, 2010. "The Impossible Trinity (aka The Policy Trilemma)," Santa Cruz Department of Economics, Working Paper Series qt9k29n6qn, Department of Economics, UC Santa Cruz.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Nitin Arora & Deepika Malik & Rahul Arora, 2022. "Which Combination of Impossible Trinity Choices Ensures Output and Price Stabilities in India? A Sign‐Restricted Vector Autoregressive Analysis," Economic Papers, The Economic Society of Australia, vol. 41(3), pages 260-275, September.
    2. Layal Mansour, 2014. "The Power of International Reserves: the impossible trinity becomes possible," Working Papers halshs-01054614, HAL.
    3. Mai, Nhat Chi, 2016. "Monetary policies and the macroeconomic performance of Vietnam," OSF Preprints akzy4, Center for Open Science.
    4. Onur zdemir, 2019. "Autoregressive Distributed Lag Approach to the Income Inequality and Financial Liberalization Nexus: Empirical Evidence from Turkey," International Journal of Economics and Financial Issues, Econjournals, vol. 9(6), pages 1-15.
    5. Yu Hsing, 2013. "Testing The Trilemma Hypothesis And Measuring Their Effects On Inflation, Growth And Volatility For Poland," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 9(3), pages 57-64.
    6. Hsing, Yu, 2013. "Impacts Of The Three Trilemma Policies On Inflation, Growth And Volatility For Ten Selected Asian And Pacific Countries," Review of Applied Economics, Lincoln University, Department of Financial and Business Systems, vol. 9(1-2), January.
    7. Feng, Ling & Le, Duong Thuy & Yuan, Fan, 2023. "Inclusion of the RMB in SDRs and the impossible trinity in China," Economic Systems, Elsevier, vol. 47(2).
    8. Steiner, Andreas, 2013. "The accumulation of foreign exchange by central banks: Fear of capital mobility?," Journal of Macroeconomics, Elsevier, vol. 38(PB), pages 409-427.
    9. Catão, Luís & Ditzen, Jan & te Kaat, Daniel Marcel, 2023. "Global Factors in Non-core Bank Funding and Exchange Rate Flexibility," CEPR Discussion Papers 18643, C.E.P.R. Discussion Papers.
    10. Raguideau-Hannotin, Léonore, 2023. "The case of financial and banking integration of Central, Eastern and South Eastern European countries: A gravity model approach," International Economics, Elsevier, vol. 174(C), pages 91-111.
    11. Aizenman, Joshua & Ito, Hiro, 2012. "Trilemma policy convergence patterns and output volatility," The North American Journal of Economics and Finance, Elsevier, vol. 23(3), pages 269-285.
    12. Enisse Kharroubi & Fabrizio Zampolli, 2016. "Monetary independence in a financially integrated world: what do measures of interest rate co-movement tell us?," BIS Papers chapters, in: Bank for International Settlements (ed.), Expanding the boundaries of monetary policy in Asia and the Pacific, volume 88, pages 193-205, Bank for International Settlements.
    13. Andrew Filardo & Stephen Grenville, 2012. "Central bank balance sheets and foreign exchange rate regimes: understanding the nexus in Asia," BIS Papers chapters, in: Bank for International Settlements (ed.), Are central bank balance sheets in Asia too large?, volume 66, pages 76-110, Bank for International Settlements.
    14. Aizenman, Joshua & Chinn, Menzie D. & Ito, Hiro, 2011. "Surfing the waves of globalization: Asia and financial globalization in the context of the trilemma," Journal of the Japanese and International Economies, Elsevier, vol. 25(3), pages 290-320, September.
    15. Kevin Gallagher, 2012. "The Myth of Financial Protectionism: The New (and old) Economics of Capital Controls," Working Papers wp278, Political Economy Research Institute, University of Massachusetts at Amherst.
    16. Michael Hutchison & Rajeswari Sengupta & Nirvikar Singh, 2012. "India’s Trilemma: Financial Liberalisation, Exchange Rates and Monetary Policy," The World Economy, Wiley Blackwell, vol. 35(1), pages 3-18, January.
    17. Joshua Aizenman & Menzie D. Chinn & Hiro Ito, 2012. "The Financial Crisis, Rethinking of the Global Financial Architecture, and the Trilemma," Chapters, in: Masahiro Kawai & Peter J. Morgan & Shinji Takagi (ed.), Monetary and Currency Policy Management in Asia, chapter 6, Edward Elgar Publishing.
    18. Yu HSING, 2012. "Effects of the Trilemma Policies on Inflation, Growth and Volatility in Bulgaria," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(4(569)), pages 49-58, April.
    19. Ramandeep Kaur, 2019. "Sensitivity of Macroeconomic Policy Goals to Trilemma and Quadrelimma Choices," Asian Development Policy Review, Asian Economic and Social Society, vol. 7(4), pages 219-238, December.
    20. Serhan Cevik & Tianle Zhu, 2020. "Trinity Strikes Back: Monetary Independence And Inflation In The Caribbean," Journal of International Development, John Wiley & Sons, Ltd., vol. 32(3), pages 375-388, April.

    More about this item

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bas:econth:y:2020:i:4:p:56-75,76-94. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Diana Dimitrova (email available below). General contact details of provider: https://edirc.repec.org/data/ikbasbg.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.