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[CANCELLED] Seminar: When Does the Mundellian Trilemma Bind? Corner Solutions Vs. Middle-Ground Policies

CIRANO

Friday 22 Mar 2019
From 12PM To 1:30PM

This event was cancelled and has not taken place.

 

Aleksandar Stojkov (Ss. Cyril and Methodius University, Skopje) and Thierry Warin (SKEMA Business School and CIRANO) presented the results of their article "When Does the Mundellian Trilemma Bind? Corner Solutions Vs. Middle-Ground Policies".

 

Abstract

The Mundellian trilemma maintained its reputation of a sensible guiding framework regarding the policy trade-offs among monetary independence, degree of exchange rate flexibility and financial openness. The trilemma lays at a highly relevant meeting point of several strands of international macroeconomics literature, examining the international transmission of monetary policy shocks, the implications of different exchange rate arrangements, and the ‘optimal’ degree of capital account liberalization and financial openness. Unlike the corner solutions or polar positions, the empirical literature has been rather silent on the middle-ground policies and their implications on macroeconomic performance. Given the theoretical guidance, it appears that many countries are opting for inefficient trilemma configurations, i.e. the degree of achievement of the three policy objectives is well below the threshold, beyond which the Mundellian trilemma becomes binding. This implies that the countries were able to – but did not – increase the degree of achievement of a certain policy objective. At least four questions naturally emerge. First, do countries with efficient trilemma configurations have better macroeconomic performance than those with inefficient ones? Second, if so, what is the welfare loss associated with an inefficient trilemma configuration? Third, does the composition (or the policy mix) of inefficient trilemma configuration matter? For instance, at the same level of inefficiency, does it matter whether monetary policy autonomy or the exchange rate stability is sacrificed? Fourth, do these patterns depend on counties’ levels of economic development?

Although some applied studies question the validity of the trilemma - in particular, part of the research on the Global Financial Cycle, a large body of empirical literature concludes that the trilemma should not be contested over a long span of modern economic history. The central objective of our study is to assess the macroeconomic implications of different policy configurations within the Mundellian trilemma. The more specific research goals are to: (1) identify the driving forces of inefficient trilemma configurations; (2) evaluate the growth and inflation implications of the complex policy trade-offs for different country groups with a particular emphasis on the European transition countries, and (3) formulate policy-relevant conclusions for the European transition countries.

Aleksandar Stojkov

Aleksandar Stojkov is Associate Professor of Economics at the Iustinianus Primus Faculty of Law at Ss. Cyril and Methodius University, Skopje, Macedonia. Aleksandar's interests are in international macroeconomics, public finance and economics of intellectual property.

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Thierry Warin

A CIRANO Researcher and Fellow since 2001, Main Researcher of the theme World Economy, Researcher in charge of Mondo.international, Thierry Warin is Full Professor in the Department of International Business at HEC Montréal. He has a Professorship in Data Science for International Business. He is President of the International Trade and Finance Association, Member of the board of editors of International Journal of Economics and Business Research, Fellow of the Salzburg Global Seminar, Researcher at CERIUM-CEUE (Université de Montréal) and President and co-founder of the NGO Ed' Haïti.

Holding a Ph.D. in Monetary Economics and Finance from ESSEC Business School, his research is mainly on international economics and finance topics, with a particular focus on the European economic integration, while using Data Science as his main methodological approach.

Thierry Warin was Full Professor at SKEMA Business School Raleigh (Founder and Director of the SKEMA Global Lab in AI), Associate Professor at Polytechnique Montréal (Director of the International Projects Program), Associate Professor at Middlebury College (Director of the International Studies and IPE program) and Academic Director at SIE-Sun Yat Sen University in Guangzhou.

An alumnus of the Salzburg Global Seminar, a former Visiting Scholar at the Minda De Gunzburg Center for European Studies (Harvard University, 2005) and the Weatherhead Center for International Affairs (Harvard University, 2015-2017), he has authored numerous academic publications and books or special issues.

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Program

12:00 - 12:30
Welcome and Lunch
12:30 - 13:30
Presentation
Aleksandar Stojkov, Thierry Warin

Location


1130 Rue Sherbrooke O #1400, Montréal, QC H3A 2M8, Canada