BIS paper highlights new channel for Mundellian ‘dilemma’
Authors weigh financial channel as explanation for why trilemma has become dilemma
Research published by the Bank for International Settlements proposes a new explanation for why exchange rate flexibility is no longer enough to guarantee monetary autonomy.
The working paper, by Georgios Georgiadis and Feng Zhu, studies the financial channel of exchange rates. The authors are interested in why the traditional Mundellian “trilemma” – named after economist Robert Mundell – appears to have become a dilemma, in which countries must restrict exchange rate stability if they want to
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