The Trials of the Trilemma: International Finance 1870-2017

30 Pages Posted: 23 Jan 2019

See all articles by Barry Eichengreen

Barry Eichengreen

University of California, Berkeley; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Rui Esteves

Graduate Institute of International and Development Studies (IHEID)

Date Written: January 2019

Abstract

In this paper we survey the history of international finance spanning a century and a half. We start by characterizing capital flows in the long run, organizing our discussion around six facts relating to the volume and volatility of capital flows, measured in both net and gross terms. We then connect up the discussion with exchange rates and monetary policies. The organizing framework for this section is the macroeconomic trilemma. We describe where countries situated themselves relative to the trilemma over time and consider the political economy of their choices. Finally, we study the connections between international finance and economic and financial stability. We present consistent measures of growth and debt crises over the century and a half covered in this paper and discuss how their incidence is related to those institutional and political circumstances and, more generally, to the nature of the international monetary and financial regime.

Keywords: Capital Flows, financial crises, Monetary Systems

JEL Classification: F21, F33, F34, N10

Suggested Citation

Eichengreen, Barry and Esteves, Rui, The Trials of the Trilemma: International Finance 1870-2017 (January 2019). CEPR Discussion Paper No. DP13465. Available at SSRN: https://ssrn.com/abstract=3319786

Barry Eichengreen (Contact Author)

University of California, Berkeley ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Rui Esteves

Graduate Institute of International and Development Studies (IHEID) ( email )

PO Box 136
Geneva, CH-1211
Switzerland

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