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

_IMF Working Papers, June 8, 2017_

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## Bibliographic details
- Authors: Maurice Obstfeld, Jonathan David Ostry, Mahvash S Qureshi
- Published: June 8, 2017
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484302620.001

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### Authors and publication
- Authors: Maurice Obstfeld, Jonathan David Ostry, Mahvash S Qureshi  
- Date: June 8, 2017  
- Series: IMF Working Papers, Working Paper No. 2017/130  
- Volume: 2017; Issue: 130; Pages: 45  
- DOI: https://doi.org/10.5089/9781484302620.001  
- ISBN: 9781484302620; ISSN: 1018-5941

### Research question and sample
- Research question: Whether exchange rate regimes are salient in the transmission of global financial conditions to domestic financial and macroeconomic conditions.  
- Sample: about 40 emerging market countries over 1986–2013.

### Key findings
- Exchange rate regimes do matter:
  - Countries with fixed exchange rate regimes are more likely to experience financial vulnerabilities than those with relatively flexible regimes.
  - Specific vulnerabilities under fixed exchange rate regimes include:
    - Faster domestic credit growth.
    - Faster house price growth.
    - Increases in bank leverage.
- Transmission of global financial shocks:
  - Transmission is magnified under fixed exchange rate regimes relative to more flexible (though not necessarily fully flexible) regimes.
- Attributed mechanisms:
  - Reduced monetary policy autonomy under fixed rate regimes.
  - Greater sensitivity of capital flows to changes in global conditions under fixed rate regimes.

### Subjects and keywords
- Subject: Balance of payments, Capital flows, Conventional peg, Exchange rate arrangements, Exchange rate flexibility, Foreign exchange, Housing prices, Prices  
- Keywords: capital flows, Conventional peg, credit growth, emerging market economies, Exchange rate arrangements, Exchange rate flexibility, exchange rate regime, federal funds rate, financial crisis, Global, global financial cycle, house price growth, Housing prices, real GDP, regime classification, regime variable, trilemma, VXO index, WP

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_Source: https://www.imf.org/en/publications/wp/issues/2017/06/08/a-tie-that-binds-revisiting-the-trilemma-in-emerging-market-economies-44942_