Impossible trinity

The impossible trinity (also known as the trilemma, the monetary trilemma or the Unholy Trinity) is a concept in international economics and international political economy which states that it is impossible to have all three of the following at the same time:

It is both a hypothesis based on the uncovered interest rate parity condition, and a finding from empirical studies where governments that have tried to simultaneously pursue all three goals have failed. The concept was developed independently by both John Marcus Fleming in 1962 and Robert Alexander Mundell in different articles between 1960 and 1963.

Historically in advanced economies, the periods pre-1914 were characterized by stable foreign exchange rates and free capital movement, whereas monetary autonomy was limited. The period from 1950–1971 had restrictions on capital movement (e.g. capital controls), but exchange rate stability and monetary autonomy were present. The period since the 1970s has been characterized by floating exchange rates, free capital movement and monetary autonomy.

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