Nobel Laureate Robert Mundell had coined the expression “impossible trinity” in the 1960s (when cross-border capital flows were far smaller compared with today’s) while arguing that a liberal capital account, an independent monetary policy and managed exchange rates cannot co-exist. One wonders whether we are in the process of trying to work an “impossible quartet” of macro-economic objectives and policies: Fiscal austerity; high real interest and exchange rates; solving the problem of bad debts of the banking system; and pursuing rapid economic growth and job creation.
As for exchange rate and growth, last week the Swiss central bank blamed
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