We assess the empirical validity of the trilemma (or impossible trinity) in the 2000s for a large sample of advanced and emerging economies. To do so, we estimate Taylor-rule type monetary policy reaction functions, relating the local policy rate to real-time forecasts of domestic fundamentals,...

Milton Friedman was a strong proponent of flexible exchange rates accompanied by a domestic monetary rule. He believed that such a combination would deliver superior economic performance and would also be more consistent with democratic principles than a regime based on fixed exchange rates and...

This paper integrates exchange-rate policy into a model of exchange- rate behavior, and examines the data econometrically to infer hypotheses about policy behavior in the 1970s. The model shows how unanticipated movements in money, the current account, and relative price levels will cause first...