International financial linkages, particularly through global bank flows, generate important questions about the consequences for economic and financial stability, including the ability of countries to conduct autonomous monetary policy. I address the monetary autonomy issue in the context of...

Introduction -- The monetary convergence hypothesis -- Evidence of monetary divergence -- From fiscal to monetary divergence -- Explaining divergence in the policy mix -- Illustrating partisan divergence in the policy mix -- Expanding the argument

The policy Trilemma (the ability to accomplish only two policy objectives out of financial integration, exchange rate stability and monetary autonomy) remains a valid macroeconomic framework. The financial globalization during 1990s-2000s reduced the weighted average of exchange rate stability...