Discussion paper

DP11027 International Channels of Transmission of Monetary Policy and the Mundellian Trilemma

This lecture argues that the Global Financial Cycle is a challenge for the validity of the Mundellian trilemma. I present evidence that US monetary policy shocks are transmitted internationally and affect financial conditions even in inflation targeting economies with large financial markets. Hence flexible exchange rates are not enough to guarantee monetary autonomy in a world of large capital flows.

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Citation

Rey, H (2015), ‘DP11027 International Channels of Transmission of Monetary Policy and the Mundellian Trilemma‘, CEPR Discussion Paper No. 11027. CEPR Press, Paris & London. https://cepr.org/publications/dp11027