Aizenman, Joshua and Sengupta, Rajeswari (2011): The financial trilemma in China and a comparative analysis with India.
This is the latest version of this item.
Download (610Kb) | Preview
A key challenge facing most emerging market economies today is how to simultaneously maintain monetary independence, exchange rate stability and financial integration subject to the constraints imposed by the Trilemma, in an era of widespread globalization. In this paper we overview and contrast the Trilemma policy choices and tradeoffs faced by the two key drivers of global economic growth-China and India. China’s Trilemma configurations are unique relative to other emerging markets in the predominance of exchange rate stability, and in the failure of the Trilemma regression to capture a consistently significant role for financial integration. In contrast, the Trilemma configurations of India are in line with choices made by other emerging countries. India like other emerging economies has overtime converged towards a middle ground between the three policy objectives, and has achieved comparable levels of exchange rate stability and financial integration buffered by sizeable international reserves.
|Item Type:||MPRA Paper|
|Original Title:||The financial trilemma in China and a comparative analysis with India|
|Keywords:||Financial trilemma; International reserves; Foreign exchange intervention; Monetary policy; Capital account openness|
|Subjects:||E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies
F - International Economics > F3 - International Finance
E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy
F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics
|Depositing User:||Rajeswari Sengupta|
|Date Deposited:||03. Jul 2012 13:02|
|Last Modified:||14. Feb 2013 14:13|
 Aizenman, J., Chinn, M., and Ito, H. (2011) "Surfing the Waves of Globalization: Asia and Financial Globalization in the Context of the Trilemma,", Journal of the Japanese and International Economies, Vol. 25, No. 3, p. 290-320.
 Aizenman, J. (2010a). "The Impossible Trinity (aka The Policy Trilemma)”, forthcoming in the Encyclopedia of financial globalization.
 Aizenman, J., Chinn, M., and Ito, H. (2010b). "The Emerging Global Financial Architecture: Tracing and Evaluating the New Patterns of the Trilemma's Configurations", Journal of International Money and Finance, Vol. 29, No. 4, p. 615–641.
 Aizenman, J., Chinn, M., and Ito, H. (2010c) The Financial Crisis, Rethinking of the Global Financial Architecture, and the Trilemma," Asian Development Bank Institute Working Paper #213 (April).
 Aizenman, J., Chinn, M., and Ito, H. (2008) "Assessing the Emerging Global Financial Architecture: Measuring the Trilemma's Configurations over Time", NBER Working Paper Series, #14533 (December 2008, updated in April 2009).
 Aizenman, J. and Glick, R. (2009) “Sterilization, Monetary Policy, and Global Financial Integration,” mimeo, University of California, Santa Cruz. Review of International Economics, Vol. 17, No. 4, pp. 777-801.
 Edwards, S. and Levy-Yeyati, E. (2005) “Flexible exchange rates as shock absorbers,” European Economic Review, 49(8), 2079-2105.
 Glick, R., and Hutchison M. (2008) “Navigating the Trilemma: Capital Flows and Monetary Policy in China”, Hong Kong Institute for Monetary Research Working Paper, No.252008.
 Hutchison, M., Sengupta, R., and Singh, N. (2011) “India’s Trilemma: Financial Liberalization, Exchange Rates and Monetary Policy”, The World Economy, Vol. 35(1), pages 3- 18, 01.
 Hutchison, M., J. Kendall, G. Pasricha and N. Singh, 2010, “Indian Capital Control Liberalization: Evidence from NDF Markets,” UCSC Working Paper (March).
 Kohli, R. (2011) “India’s Experience in Navigating the Trilemma: Do Capital Controls Help?” ICRIER Working Paper 257, June.
 Mohan, R., and M. Kapur 2009, Managing the impossible trinity: volatile capital flows and Indian monetary policy - Stanford Center for International Development, Working Paper 401.
 Obstfeld, M., Shambaugh, J. C. and Taylor, A. M. (2010), “Financial Stability, the Trilemma, and International Reserves”, American Economic Journal: Macroeconomics, 2(2): 5794.
 Patnaik, I., A. Shah, A. Sethy, and V. Balasubramaniam. (2011), “The exchange rate regime in Asia: From crisis to crisis”, International Review of Economics and Finance, 20, 32-43.
 Shah, A., 2008, New issues in Indian macro policy. In T. N. Ninan, editor, Business Standard India. New Delhi: Business Standard Books.