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Taylor's work featured in The Economist

The Mundell-Fleming policy trilemma

Alan Taylor, a Professor in the Economics Department at UC Davis, was featured in a recent article in The Economist magazine.  The article discusses the tension policy makers face between the goals of managing foreign exchange rates, controlling monetary policy, and allowing the free movement of capital.  The policy trilemma, a phrase coined by Taylor and co-author Maurice Obstfeld in 1997, is that countries are doomed to choose two of the three but can't have all of them. "Where barriers to capital flow are undesirable or futile, the trilemma boils down to a choice: between a floating exchange rate and control of monetary policy; or a fixed exchange rate and monetary bondage."