A Tie That Binds: Revisiting the Trilemma in Emerging Market Economies

Maurice Obstfeld; Jonathan D. Ostry; Mahvash S. Qureshi

doi:10.1162/rest_a_00740

A Tie That Binds: Revisiting the Trilemma in Emerging Market Economies

Maurice Obstfeld¹; Jonathan D. Ostry²; Mahvash S. Qureshi³

¹ University of California, Berkeley, NBER, and CEPR · ² International Monetary Fund and CEPR · ³ International Monetary Fund

The Review of Economics and Statistics 2019

This paper examines the claim that exchange rate regimes are of little salience in the transmission of global financial conditions to domestic financial and macroeconomic conditions by focusing on a sample of about forty emerging market countries over 1986 to 2013. Our findings show that exchange rate regimes do matter. The transmission of global financial shocks to domestic credit and house price growth, as well as to banking sector leverage and domestic output, is magnified under fixed exchange rate regimes relative to more flexible (though not necessarily fully flexible) exchange rate regimes.

DOI: 10.1162/rest_a_00740
Volume: 101 (2)
Pages: 279-293
Language: en
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