“The Impacts of Crises on the Trilemma Configurations”

Excepting international reserves, trilemma configurations were durable through the global financial crisis. From Aizenman, Chinn and Ito (forthcoming Open Economies Review, 2022) (also NBER WP No. 30406).

Over the years, policymakers have explored various combinations of varying degrees of monetary policy independence, exchange rate stability, and financial openness while recognizing that not all three policies can be achieved to the fullest extent – the “monetary trilemma” hypothesis. In recent years, holding international reserves (IR) has become an important policy instrument as a buffer or insurance against liquidity shortages. Significant and fundamental economic events such as currency crises have often changed the policy mix. In this paper, we find that countries’ policy mixes have been diverse and varied over time from the perspective of the trilemma and also IR holding. We then illustrate how the combination of the three trilemma policies and IR holding drastically changed before and after the Asian Financial Crisis (AFC). However, the Global Financial Crisis did not lead to a drastic change in the policy arrangements. We find that countries that faced large terms of trade shocks or negative economic growth during the crisis increase IR holding in the post-AFC. Countries that had negative growth during the crisis also tend to pursue more exchange rate flexibility and more open financial markets. This characteristic is true for commodity exporters, but not for manufacturing exporters. Countries with large current account deficit (i.e., “large capital borrowers”) tend to be more sensitive to economic growth at the time of the AFC. Countries that are under IMF stabilization programs or those with sovereign wealth funds tend to hold more IR. These characteristics were not found in the aftermath of the GFC. In general, countries increased their IR holdings after the GFC, but did not respond to the during-crisis economic and institutional conditions.

Two graphs show the broad sweep of our some of our results (many more are in the paper). First is a graph of the share of world holdings of international reserves, by regional grouping. The second shows trilemma configurations for Emerging Asia, pre- and post-Global Financial Crisis.

Figure 1:  IR Holding by Country Groups (% of World Total). Source: Aizenman, Chinn, Ito (OER, 2022), Figure 3b.

The late 1980’s increase in Asian developing countries ex-China shows up clearly, with China’s share rising sharply post-2000. The Global Financial Crisis actually marks the end of rapid increase in China’s share (although not in actual level of holdings).

Figure 2 shows for Emerging Asia the trilemma configurations (monetary independence, exchange rate stability, and financial openness, along with international reserve holdings), as discussed in this post, and  Aizenman, Chinn and Ito ( [ACI2010]  [ACI2011] [ACI2016] [ACI2017] [ACI2020]).


Figure 2: Impacts of the Global Financial Crisis on the Trilemma and IR Configurations. Source: Aizenman, Chinn, Ito (OER, 2022), Figure 5b (excerpt).

Post-GFC (and pre-pandemic), exchange rate stability drops slightly, while financial openness, monetary autonomy and international reserves increase.

Among the various country groupings examined, this group shows perhaps the most marked changes going from pre-GFC to post-GFC, with perhaps the exception of Eastern and Central Europe.

In the paper, we also examine the implications of the East Asian Crisis of 1997, and the differential impact on commodity and manufactured goods exporters.

41 thoughts on ““The Impacts of Crises on the Trilemma Configurations”

  1. pgl

    “This is clearly a political move. Clearly they could have asked Donald Trump for the documents if they wanted them so bad, but there’s no evidence that they did. So that’s what I’ve been saying over and over again. Now, that doesn’t mean I want to defund the FBI and if you do want to defund the FBI, then I can point you to the Democrat Party because they also want to defund the police,” Crenshaw said.


    That Dan Crenshaw is a liar is old news but these lies are just stupid. The FBI issues a subpoena for these document and Trump refused to comply with it. I presume Crenshaw knows what a subpoena is but maybe not. BTW Republicans like Crenshaw are calling for the FBI to be defunded but the Democratic Party does NOT want to defund the police. Crenshaw has to know all of this unless his IQ is in the single digits.

    1. Rick Stryker


      You are not keeping the leaks from DOJ and FBI straight. Supposedly, the grand jury issued a subpoena in the spring and they came by and picked up documents. Trump and his people cooperated. Then, confidential sources informed the FBI, allegedly, that not all the docs demanded by the subpoena had been turned over. Hence the raid.

      That’s their side of the story according to their leaks to the gullible and compliant press. The track record for veracity on these leaks about Trump from the FBI and DOJ has been very poor. Of course, the DOJ also opposes that the affidavit justifying the warrant be released. Convenient, because then people would see the real reason they told a judge they needed to do a raid. Yet, they don’t want people to see that, preferring to communicate their supposed reasons through self-serving leaks.

      BTW, do you think you can trust Moses with your secret identity? Moses doesn’t believe Barkley could be trusted if he knew it.

      1. Ivan

        Trump stole a bunch of documents. He was told to give them back and reluctantly gave back some of them. He said that all had been given back, but source/evidence suggested that was not true. Sources/evidence was presented to a Trump appointed judge who agreed the evidence was sufficient to issue a search warrant. The search proved that Trump had lied and additional stolen document were indeed found and repossessed. Clearly the sources/evidence turned out to be correct. There is no legitimate justification to reveal the sources/evidence until an indictment is issued. Like any other accused person Trump will be given access to the evidence after the indictment is issued. The reason it is not released before is because the defendant could use that information to sabotage the investigation. All according to standard procedures and all as it should be.

          1. Ivan.

            No it based on public court documents and things seen on television. There are a few details that will be clarified when the Judge release a redacted version of the affidavit. The rest is right there in the already public court documents.

          2. Rick Stryker


            There are no court documents other than the warrant, which reveals nothing. Everything you’ve seen on tv is based on leaks. Show me the public court documents.

          3. Ivan

            “There are no court documents other than the warrant”

            Again you are spreading Faux news – the list of items removed from Mar-a-Lago was made public at the request of FBI and without objections from Trump. So yes plenty of documents in addition to the Search warrant.

            The outcome of the search demonstrated beyond doubt that the search was indeed needed to recover and rescue additional stolen documents. The exact nature of the evidence that convinced this Trump appointed judge to allow the search is not going to change the facts of this theft and criminal attempt to retain some of the stolen goods.

        1. Rick Stryker


          Your entire narrative in based on leaks from the DOJ and FBI fed to a compliant media. Show me any court documents that backs any of that up.

          And the “judge” was not appointed by Trump, nor was he a judge. He is a low-level magistrate appointed by a judge to handle routine warrant requests. That magistrate recused himself from the Trump-Clinton civil lawsuit (why?) but then later signed off on a search warrant of Trump’s home. This same magistrate formerly made disparaging remarks about Trump on social media.

          You don’t think it’s strange that a lowly magistrate, with admitted bias around Trump, was allowed to sign off on a warrant of that magnitude. The magistrate didn’t feel the need to bring in an actual judge for review? The DOJ didn’t think they needed to do that?

          The Biden Administration has weaponized law enforcement against their political enemies. That’s why they did it the way it was done.

          1. pgl

            Gee I thought you were an incompetent Ph.D. in economics. It turns out that you are the typical lying incompetent attorney.

          2. pgl

            “Your entire narrative in based on leaks from the DOJ and FBI fed to a compliant media.”

            A lot of what Ivan is noting comes from examining the conflicting statements from Trump. So the leaker is the mob boss you are trying to defend. Hey Rick – stick to making calculus as arcane as possible because you suck as a lawyer.

          3. Moses Herzog

            What Great Orange Creature and Embodiment of Personal Ethics does Rick Stryker believe??

            The orange man who says on Monday the highly confidential national security documents he stole are all “lies”. The orange man who says on Tuesday the highly confidential national security documents he stole are “planted”. The orange man who says on Wednesday the highly confidential national security documents he stole are “leaks”. The orange man who says on Thursday the highly confidential national security documents he stole are “personal property and stolen”. The orange man who says on Friday the highly confidential national security documents he stole are all “attorney-client privilege”.

            How are “lies” magically transmorphed into trump staff inside leaks?? And why is an “innocent man” afraid of “rats” on his staff?? Why is an “innocent man” afraid of mics/bugs on his phones? How do documents that trump says are declassified over a year ago become “planted”?? How does something “planted” become something trump wants returned to his home?? How did trump “declassify” things over a year before they were “planted”?? How do “declassified” documents become “attorney-client privilege”??

            Only Rick Stryker and the brainwashed MAGAs can provide the answers to those questions. They can. And Richard Nixon “is not a crook”.

      2. pgl

        ” Supposedly, the grand jury issued a subpoena in the spring and they came by and picked up documents. Trump and his people cooperated.”

        Supposedly? If they had cooperated then the nothing was found during the most recent visit. Of course documents were found. That lawyer who had declared all had been turned over is now facing serious consequences because she LIED. Which of course you are do so as well.

        Nice try, however, from someone whose only degree is from Pepperdine.

      3. pgl

        BTW dumbass – Barkley and I are fellow bloggers at Econospeak. So I trust him and Moses because nothing one is a snake in the grass like you are. BTW – when is your next porn movie coming out?

        1. Rick Stryker


          So you are saying that you can trust Moses and Barkley with your secret identity but you can’t trust me? With all the insults you throw my way, (“snake in the grass”) you must be pretty confident I don’t know who you are and won’t be able to find out, because according to you, if I did know who you are, I’d reveal it. Moses thinks I would too.

          I bet Kopits would like to know who you are as well given all the insults you’ve hurled at him. Easy for you to call people idiots and incompetent from anonymity. If he did know, I bet he’d not reveal it. Neither would I. I understand why people want to comment anonymously. You shouldn’t demonize people who you disagree with or assume the worst.

          1. pgl

            “I bet Kopits would like to know who you are as well given all the insults you’ve hurled at him. Easy for you to call people idiots and incompetent from anonymity.”

            That’s rich from someone who is also using a fake name. I do not insult people when they are at least trying to present coherent economic arguments. If you think Kopits and Bruce Hall are making sense – then your knowledge of economics is about as pathetic as it gets.

          2. Rick Stryker


            Wow, you just keep the insults coming. When you use language like “dumbass,” “snake in the grass,” or “porn star” against people you disagree with, there is a lot of unresolved anger there.

            You may know that I’m also Professor of Free Market psychology at Wossamotta University. I’ve already put Moses under psychoanalysis. Think you would benefit too.

            You seem to be suffering from a classic case of angry leftist phd syndrome (ALPS). I’ve seen many cases before (even teach a seminar at Wossamotta) and they generally follow a classic pattern.

            The ALPS sufferer typically got his PhD many decades ago, like in the 1980s. Then he went off to what he expected would be a great academic career, but spent a decade or so bouncing around several universities while publishing a few papers, the best of which landed in field journals. At that point, the ALPS victim usually decides its time to leave academia but can’t at first with just academic experience. Usually, they get a government job first. Then they go into something related to economics, something that requires report writing, expert analysis, etc. In the end, when they retire or are forced out, they become independent consultants.

            From the facts I’ve seen, I imagine you are at the end stage of the neurosis, the consultant stage. That’s the stage at which the victim is usually most angry. His leftism comes from his anger: if the economy were more just, he would have been more successful. He feels ashamed that he compromised his academic goals for money and more ashamed that it wasn’t more money. He feels with his training and intellect he should have had more power, authority, and material comfort. But free market capitalism rewards the idiots he believes, people who are too stupid to appreciate (and pay for) his talent and knowledge. He hates the people who defend the free market, the conservatives. And he especially hates other consultants who he feels don’t have his knowledge and training, people like Steven Kopits. He burns with anger at the thought that anyone could listen to Kopits or actually pay him anything. In the victim’s imagined leftist world, that wouldn’t happen. Shouldn’t happen. Couldn’t happen.

            We need to work on breaking the cycle of anger and then you’ll be reading von Mises with a smile on your face. Unfortunately, that’s all the time we have right now. Next time.

          3. pgl

            Wossamotta University is where THE RICK got his Ph.D. in economics. Professor Rocky was his dissertation chair with Bullwinkle being his research assistant. That explains a lot! m

          4. Rick Stryker


            You seem to be resisting psychoanalysis, most likely because you don’t think ALPS applies to you. I’ve seen this before. Often the patient develops amnesia to block out the more painful episodes. Perhaps this will help. I’m also Professor of Free Market Machine Learning and I’ve run some NLP models on your speech patterns combined with the general diagnosis. Interestingly enough, the models say you spent some time in the LA area, some time in the Philadelphia area, and, interestingly enough, some time in the vicinity of the U.K. Jog any memories? If not, I can dial up the precision of the models. I should be able to pinpoint the places more precisely, if needed.

        2. Rick Stryker


          Doxxing is a left wing tactic. I have no doubt that you would Doxx me in a second if you could. Menzie would love to do it.

          1. pgl

            We have doxxed you which is how we know you’re a porn star. I’m sure Atrios was outed by one of his “left wing” friends. Oh wait – you do not know who he is even if everyone else does.

      4. pgl

        “The track record for veracity on these leaks about Trump from the FBI and DOJ has been very poor.”

        Like Trump is the honest one here. Did you even pass kindergarten? DAMN!

      5. Barkley Rosser


        FBI and DOJ leaks are not to be trusted? It is my understanding that after FBI came by and got some stuff, Trump’s lawyer, Bibb signed something saying that the FBi had all the classified documents that had been at Mar-a-Lago, that there were no more there. That was clearly false. Did she sign that statement or not? If so, this puts the onus pretty squarely and heavily on Trump. outright officially lying about having classified documents, some of them at the highest level.

        1. Rick Stryker


          Yes, I don’t trust FBI or DOJ leaks regarding Trump and you shouldn’t either. Let’s see the affidavit.

          1. Ivan

            “Lets see the affidavit” is the next mantra from the right wing clown parade.

            They picked that one because they know they will never be allowed to see an un-redacted affidavit until a potential trial, so it’s a sure bet for the stalling tactic of claiming we” don’t know enough yet” (to see what is actually right there in front of our own lying eyes). It will hold credibility within their flock of minions at least until this story is in the rear view mirror – and if they actually got the names of sources that would be a huge win.

            For those of us who live in the real world, the important facts are already available. And nothing in the affidavit can change the facts that: 1. Trump stole a large number of boxes with documents when he left the white house; 2. Trump returned some of those boxes; then his lawyer declared that all classified material had been returned; 3. A legally executed search warrant found additional boxes of stolen documents including some labelled at the highest level of confidentiality and restricted access.

            So yes he stole documents and didn’t return them all when asked to do so. Thats the meat and potatoes of this story.

          2. Barkley Rosser


            I don’t think you have anything here with all these claims of fake leaks from DOJ and FBI. Large amounts of what have happened are public information in public documents, and in many cases also verified by the Trump people. We have seen the warrant, if not yet the redacred affidavit. It has been public information for some time that the National Archives was trying to get documents from Trump they knew he had. Are they also unreliable leakers. They had to go to DOJ to get him to give any of them up. So her did.

            It is the Trump people themselves who admit, even bragged, that FBI was there earlier getting stuff in June. All of this was supposedly low key, no guns or raids. Apparently Trump’s lawyer admits she signed this document saying FBI had gotten everything, that there were no more classified documents.

            Are you really claiming that the FBI is lying that they found four boxes of top secretr documents and one of the much higher level of secrecy when they searched on August 9? Really?

            I get it that a lot of Trump fans are having trouble accepting what is the situation here, but you all really do need to face facts. After all, just look at the string of completely incoherent and incompatible claims Trump has made about al this, I am losing track. Nothing there, but it was planted by the FBI, oh, and he had it all declassified, and now he needs it back because of attorney-client priviliege, etc. But you want to claim that they got nothing and it is all just unreliable leaks from the DOJ and FBI? I thought you were smaeter than this sort of total silliness. There is a lot, and they got it, and he is in deep doo doo that Kash Patel cannot get him out of.

          3. Rick Stryker


            You are just repeating the narrative created from unnamed sources. There are no court records as of yet to back up any of that. If you think there are, what are they? Here’s what we do know at this point.

            1. The DOJ and FBI controlled by a sitting President decided to conduct an unprecedented search of the of the house of the likely presidential candidate who would oppose them in the next election.
            2. When they conducted that search, the FBI demanded that Trump’s lawyers stand outside, so the search could not be observed by them. They also demanded that the cameras be turned off, so the search could not be videotaped. (Trump’s staff ignored the FBI’s illegal demand.)
            3. We know that the text of the warrant was incredibly broad and not confined or specialized to classified documents at all. Despite the narrative of the leakers about classified information and nuclear weapons documents, the federal statutes cited did not require that any documents be classified or marked classified in order to be seized by the FBI.
            4. We know that given how broad the warrant was, Trump has a very good case that his fourth amendment constitutional rights were violated by the FBI search.
            5. We know that the FBI asserted that it had seized documents with various classified markings, but that does not mean that they are currently classified. Constitutionally, the President has the ultimate authority to classify and declassify, not the FBI, not the CIA, and not the DOJ.
            6. We know that the warrant was so broad that the FBI seized Trump’s passports. When Trump complained publicly, a “source” told NBC news that Trump’s passports had not been taken. Trump then produced the email in which the government returned his passports, proving that the source was lying to an ever gullible NBC.
            7. We know that the judicial official who approved the warrant was a magistrate, not a judge, and was appointed by a judge to delegate to the magistrate the less important warrants and other court business.
            8. We know that this magistrate had formerly been controversial because he left his government job to represent Jeffry Epstein’s staff members.
            9. We know that this magistrate had formerly recused himself from the Clinton-Trump civil lawsuit but did not recuse himself from the warrant.
            10. We know that the magistrate did not elevate the matter to a judge, despite the fact that the warrant was on a former President of the United States
            11. We know the magistrate had formerly made a derogatory remark about Trump on Facebook

            This all looks really bad to any objective person. But I’m sure you never heard any of this. That’s because the Biden Administration has been feeding their self-serving leaks to the newspapers you read and that’s all you read.

          4. pgl

            “This all looks really bad to any objective person.”

            You clearly are not objective and I have my doubts that you are even a person. You remind me of RUDY’s bot.

          5. Ivan

            Wow Rick,

            You are complaining that our sources are leaks from unreliable sources, then you give us an 11 point statement of Faux news Jeanine Pirro alcohol induced delirium – with little support in any facts and lots of misrepresentation/misinterpretation on the few items that are not complete made up nonsense.

            Have fun in the Trump cult universe – I have done as much as I am willing to do for you.

          6. Rick Stryker


            Unlike you, I can back up every statement with actual evidence.

            How about point 9: Reiner’s order

            How about point 11 Reinhart’s FB post after Trump’s win
            On point 11, I’ll throw in some bonus evidence of political bias: Reinhart’s donations to Obama

            I can keep going. I can back up everything I say with actual facts. If you don’t believe it, pick another point. You on the other hand are just repeating the leaks that the Obama Administration wants you to believe.

          7. Barkley Rosser


            There is a very basic fact you seem to be ignoring here. Quite aside from the issue of classification, with several Trump aides saying he never made any standing order about declassifying things. and Bobb, not Bibb, definitely signing this false statement in June that the FBI had all the classified material there was when that is clearly a lie, there is the basic fact that Trump had no legal right to have any of this stuff, even the unclassified. He stole it from the American people. This all was initiated by the legal holder, the National Archives, over a year ago, and Trump has resisted obeying the law over and over since. No other president has done this, not even remotely.

          8. Barkley Rosser

            And now it is being reported, oh right, fake news FBI leaks, that Trump went over all that stuff in Dec. 2021 back when he was resisting the completely legal by the National Archives to turn everything over to them. He did some of it in January, when they realized a bunch of it was classified, reportedly 150 pieces or so. When they realized he was still sitting on some of it, then they went to the DOJ.

            I thought you were smarter than to fall for the worst and stupidest sorts of Trumpist conspiracy hoaxes. This stuff is just brazen and getting worse by the minute.

          9. Rick Stryker


            What your missing is my main point, which is what you think are facts are actually just leaks and propaganda. Your belief that Trump stole documents that belong to the American people is a case in point. Instead of reading the media, why don’t you read the actual text of the Presidential Records Act and then look at the warrant. The warrant said to seize all materials generated during Trump’s presidency “illegally” possessed. But Congress explicitly did not make the PRA a civil nor criminal statute. A President can’t violate it in any legally enforceable sense. As a consequence, the warrant was an illegal search and seizure of Trump’s private residence. There is nothing in the PRA that says a President can’t keep some of his records, including classified records. That’s a matter of negotiation. There is no deadline specified in the statute for when a President will give records to the PRO. The PRA says the President must have access at all times to his records, regardless of how they are kept, classified info not excluded, and sharply limits who else may have access for 5 years. Right now the DOJ and the FBI are violating the PRA by denying Trump’s access to presidential records. And they are violating the former Presidents right to have access to his records strictly limited for 5 years.

            Because it’s Trump, you can’t see that the FBI and DOJ have behaved in a highly illegal manner. People would be howling if this happened to any other President. You may not like Trump, but there are much more important issues at stake.

        2. pgl

          “Bibb signed something saying that the FBi had all the classified documents that had been at Mar-a-Lago, that there were no more there. That was clearly false. Did she sign that statement or not?”

          She did sign it which may cost her the right to practice law. No loss as she is as incompetent at law as Rick is at economics.

      6. pgl


        A federal judge in Florida formally rejected the Justice Department’s plea Monday to keep an affidavit underpinning the Aug. 8 raid at former President Donald Trump’s Mar-a-Lago estate completely private. In his 13-page ruling, US Magistrate Judge Bruce Reinhart found that the government had not justified “keeping the entire Affidavit under seal” due to “the intense public and historical interest in an unprecedented search of a former President’s residence.”…Reinhart warned of that possibility in his Monday order, writing: “I cannot say at this point that partial redactions will be so extensive that they will result in a meaningless disclosure, but I may ultimately reach that conclusion after hearing further from the Government.” Federal agents seized 27 boxes from Trump’s estate, including 11 sets of classified documents that were labeled top secret, secret, or confidential, according to an inventory list made public by Reinhart on Aug. 12. Reinhart had approved the search warrant as part of a federal probe into whether Trump illegally took classified material with him to Mar-a-Lago when he left the White House. The search warrant authorized the FBI to seize “all physical documents and records constituting evidence, contraband, fruits of crime, or other items illegally possessed” in violation of three federal laws — including the Espionage Act of 1917.

        Hey Rick – have you read this 13 page ruling as Reinhart has noted every bit of your babbling on this issue is patently false.

        But hey – you want to be a big shot lawyer so I guess blatant lying comes natural.

  2. Macroduck

    I can think of one explanation for the failure of countries to response to the Great Financial Crisis by building hard currency reserves. Countries for which building reserves was a manageable option had already done so n response to the Asian Crisis. We can’t all rearrange our economes to run persistent net exports.

    OK, two explanations. The Asian Crisis had the effect of strengthening the U.S. dollar while interest rates were trending lower and the U.S. continued to grow. The U.S. facilitated reserve accumulation elsewhere with an increased trade deficit. The U.S. was at the center of the GFC, and as is the usual case in recession, narrowed it’s trade deficit.

    The U.S. is large and has a relatively high marginal propensity to import; it’s the swing country for trade. In the Asian Crisis, the U.S. swung in one direction, the other direction in the GFC.

    1. Barkley Rosser

      Something I do not see discussed in this post is the matter of borrowing from abroad in foreign currencies. That is indeed another item beyond those in this classic trilemma, which the GFC certainly made more salient for many of these nations. But in the late 90s ASian financial crisis a key part of the problem was that several nations had borrowed heavily in US dollars, which then set them up to get into a lot of trouble quite suddenly.

  3. rsm

    Are trilemmas obsolete (and thus perfect for our blogger to obssess over)?

    《there is no Triffin’s current account dilemma (the assertion that US current account deficits are necessary to meet global demand for reserve currency) because dollars are created by banks rather than current account deficits. 》


    Is the US a “large capital borrower” or is the rest of the world simply hungry for created US dollars?

    1. Barkley Rosser

      No, rsm, the US example does not obviate the trilemma. The USD floats. Indeed, it was to escape from the trlemma back in the early 1870s that the US moved to floating the USD.

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