Guillaume Bazot, Michael Bordo, Eric Monnet, 16 December 2014

The recent focus on central banks’ balance sheet policies has brought new interest to the question of how they deal with the international finance constraint. This column gives historical perspective to the issue by examining the policies of the Banque de France during the gold standard. The Banque used its domestic portfolio to stabilise interest rates rather than using exchange rate intervention. This sheds new light on the standard view that discount rates and capital controls were the primary monetary policy instruments during the gold standard.

Michael Bordo, Owen Humpage, Anna Schwartz, 18 June 2012

The so-called trilemma of international finance maintains that a country cannot simultaneously peg an exchange rate, maintain an independent monetary policy, and permit free cross-border financial flows. At best, only two of the three are feasible. This column argues that despite their best efforts, countries are set to learn this lesson again and again.

Joshua Aizenman, Daniel Riera-Crichton, Sebastian Edwards, 14 January 2012

Last year’s surge in commodity prices was a reminder, if we needed one, of the problems caused by terms-of-trade volatility in emerging economies. This column looks at the real exchange rate adjustments to commodity terms-of-trade shocks in the region exposed to the highest volatility – Latin America. It finds that active reserve management not only lowers the short-run impact of shocks, but also substantially reduces real exchange rate volatility.

Rajeswari Sengupta, Joshua Aizenman, 15 November 2011

Emerging markets face what some economists are calling a trilemma. They cannot simultaneously target exchange-rate stability, conduct an independent monetary policy, and have full financial integration. So what to do? This column looks at how Asia’s giants are responding – and in different ways.


CEPR Policy Research