The exchange-rate regime is often seen as constrained by the monetary policy trilemma, which imposes a stark tradeoff among exchange stability, monetary independence, and capital market openness. Yet the trilemma has not gone without challenge. Some (e.g., Calvo and Reinhart 2001, 2002) argue...

This paper develops a dynamic framework in which macroeconomic liberalization and stabilization measures of the type recently seen in Latin America can be studied. The model is sufficiently general to cover both polar cases of a closed capital account and free private capital mobility, so the...

Greater financial integration between core and peripheral EMU members not only had an effect on both sets of countries but also spilled over beyond the euro area. Lower interest rates allowed peripheral countries to run bigger deficits, which inflated their economies by allowing credit booms....