The Optimal Policy Combinations Based on the Trilemma and the Predictability of Crisis

Professor Ito has conducted an empirical analysis on the impact of policy mismanagement on the probability of a financial crisis in the context of the "trilemma" hypothesis, which states that countries can achieve only two, not all at once, of the three open macro policy goals: monetary independence, exchange rate stability, and financial integration. This study will be an extension to the research projects Professor Ito has conducted with ADBI Dean Masahiro Kawai, in which they constructed a new set of indexes that measure the extent of achievement in each of the three policies.

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