## Trinity Strikes Back: Monetary Independence and Inflation in the Caribbean

_IMF Working Papers, September 20, 2019_

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## Bibliographic details
- Authors: Serhan Cevik, Tianle Zhu
- Published: September 20, 2019
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513511702.001

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### Overview
- Title: Trinity Strikes Back: Monetary Independence and Inflation in the Caribbean
- Authors: Serhan Cevik, Tianle Zhu
- Date: September 20, 2019
- Study period: 1980–2017
- Core question: Relationship between monetary autonomy and inflation dynamics in a panel of Caribbean countries.
- Key definition: Monetary independence is measured as a country’s ability to conduct its own monetary policy for domestic purposes independent of external monetary influences.
- Main methodological note: Results are robust to alternative specifications and estimation methodologies.

### Empirical findings
- Greater monetary policy independence leads to lower consumer price inflation.
- Monetary independence is a significant factor in determining inflation, even after controlling for macroeconomic developments.
- The relationship between monetary independence and inflation is robust to alternative specifications and estimation methodologies.
- Contextual emphasis: Findings are especially relevant for countries that maintain pegged exchange rates relative to the U.S. dollar, given the critical bearing of such pegs on monetary autonomy.

### Policy implications and relevance
- Monetary autonomy matters for inflation outcomes; policymakers should consider the trade-offs implied by the macroeconomic policy trilemma (an independent monetary policy, a fixed exchange rate, and free movement of capital cannot coexist).
- For Caribbean countries with pegs to the U.S. dollar, the loss of monetary autonomy associated with pegged exchange rates has clear implications for domestic inflation control.
- The study’s results carry direct policy relevance for central bank design and exchange rate arrangements in the region.

### Key statistics and publication metadata
- Pages: 19
- Volume: 2019
- Issue: 197
- Series: Working Paper No. 2019/197
- DOI: https://doi.org/10.5089/9781513511702.001
- Stock No: WPIEA2019197
- ISBN: 9781513511702
- ISSN: 1018-5941

*Source: Serhan Cevik and Tianle Zhu, "Trinity Strikes Back: Monetary Independence and Inflation in the Caribbean", IMF Working Papers 2019, 197 (2019).*

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_Source: https://www.imf.org/en/publications/wp/issues/2019/09/20/trinity-strikes-back-monetary-independence-and-inflation-in-the-caribbean-48599_