Dilemma not Trilemma：不三难困境英文精品课件.pdfVIP

Dilemma not Trilemma: The Global Financial Cycle and Monetary Policy Independence Hélène Rey Introduction If one looks at the evolution of financial integration over the past half‐century in the world economy, one might conclude that finan- cial openness is an irresistible long-run trend, hailed by policymak- ers and academic economists alike. Both emerging markets and ad- vanced economies have increasingly opened their borders to financial flows. The scope for international capital flows to provide welfare gains or to do harm has widened considerably since the 1990s. In international macroeconomics and finance we often think with- in the framework of the “trilemma”: in a financially integrated world, fixed exchange rates export the monetary policy of the center country to the periphery. The corollary is that if there are free capital flows, it is possible to have independent monetary policies only by having the exchange rate float; and conversely, that floating exchange rates enable monetary policy independence (see e.g., Obstfeld and Taylor 2004). But does the scale of financial globalization and in particular the role of global banks put even this into question? Are the financing conditions set in the main world financing centers setting the tone for the rest of the world, regardless of the exchange‐rate regime? Is there a global financial cycle and if yes, what are its determinants? 285 286 Hélène Rey Risky asset prices around the globe, from stocks to corporate bonds, have a strong common component. So do capital flows. Credit flows are particularly pro-cyclical and volatile. As credit cycles and capital flows obey global factors, they may be inappropriate for the cycli- cal conditions