Empirical Evidence of a New Trilemma

The scope of this research paper is to investigate the trade-off which appears when dealing with the “new trilemma” (formed by price stability, financial stability and sovereign debt sustainability) brought forward by Duvvuri Subbarao. More specifically, the paper offers interesting empirical proofs on the existence of trade-off within the “holy trinity” using the Principal Components Analysis (PCA) and confirming the robustness of the results with a cross-country panel OLS regression.