The 'trilemma' hypothesis and policy implications for Fiji

Hyeon Seung Huh, Philip Inyeob Ji, Cyn Young Park

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

This paper examines the trilemma constraint for Fiji; that is, we investigate how trilemma policy variables were used to address policy trade-offs among the three objectives of exchange rate stability, monetary autonomy, and financial openness. Fiji makes an interesting case because of its policy orientation towards a stable exchange rate and adequate foreign reserves. Our results suggest that the trilemma constraint is binding for Fiji and policy priority is given to exchange rate stability and monetary policy independence, while less emphasis is placed on financial market openness. We also find that the actual policy levels do not deviate substantially from optimal levels, which evidences that Fiji's policy management has been efficient under the trilemma constraint. Finally, we also study the effects of various trilemma policy combinations and foreign reserve holdings on output growth and inflation.

Original languageEnglish
Pages (from-to)99-119
Number of pages21
JournalAsian-Pacific Economic Literature
Volume30
Issue number1
DOIs
Publication statusPublished - 2016 May 1

All Science Journal Classification (ASJC) codes

  • Geography, Planning and Development
  • Development
  • Economics and Econometrics

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