Obstfeld and Taylor back dual trilemma global finance theory

Economists would do a better job of thinking about instability in the global monetary system – and how to overcome it – if they incorporate both monetary and financial stability ideas into their models, according to a recent paper by Maurice Obstfeld and Alan Taylor.

Obstfeld and Taylor have, in the past, studied the evolution of the international monetary system through the lens of the monetary trilemma, with countries able to pick at most only two from: exchange rate stability; open capital