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Trilemma indicator update | Economy Browser

The international trilemma—sometimes called the impossible trinity—is the proposition that a country cannot simultaneously pursue sufficient capital flows, sufficient exchange rate stability, and full currency autonomy.

source: Ito (2021).

In a series of papers Joshua Eisenman, Itohiro I calculated an index that measures each dimension and evaluated the impact of the choices made by countries ( [ACI2010] [ACI2011] [ACI2016] [ACI2017] [ACI2020]). These indexes have just been updated (Website is here), achieve “currency independence” and “exchange rate stability” by 2020, and achieve financial openness by 2019 (such as This post).

In the image below, you can see the evolution of the choices made by a group of countries—industrial (IDC), emerging markets (EMG), and non-emerging market underdeveloped countries (non-EMG LDC) in general.

source: Ito (2021).

source: Ito (2021).

source: Ito (2021).

Data is provided for free here.

There are other ways to measure the dimensions of the trilemma; see Klein and Shambaugh here, Obstfeld, Shambaugh and Taylor here (Among many others).

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