Real Exchange Rate Targeting: Currency or Capital Control Problem? Fiscal Policy

The paper shows that the impossibility to reach a real exchange ratetarget, as proposed by the "Monetary Trilemma" can be circumvented byadding one policy instrument. In the choice between countercyclical fiscalpolicy and control of capital movements, the first one appears as thepreferred...

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Bibliographic Details
Main Author: Milei, Javier Gerardo
Format: Online
Language:spa
Published: Instituto de Economía y Finanzas. Facultad de Ciencias Económicas. Universidada Nacional de Córdoba. 2004
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Online Access:https://revistas.unc.edu.ar/index.php/REyE/article/view/3807
Description
Summary:The paper shows that the impossibility to reach a real exchange ratetarget, as proposed by the "Monetary Trilemma" can be circumvented byadding one policy instrument. In the choice between countercyclical fiscalpolicy and control of capital movements, the first one appears as thepreferred option, since it provides a stable equilibrium. Not only anequilibrium is not achieved in the second case, but the restrictions tocapital movements in an economy whith a low level of capitalization doesnot look like a sensible choice.