Trilemma Indices Updated

Chinn-Ito Index Updated to 2011 Our index, based upon the IMF’s tabulation of external account restrictions, has been updated to 2011. We find (1) retrenchment in emerging markets, (2) and regionally, little change on average in East Asia/Pacific and South Asia/Middle East and Africa.

The Chinn-Ito KAOPEN index -- a measure of de jure financial openness -- has just been updated to 2010 (site here). The results show some slight retrenchment in recent years, particularly in LDCs and emerging markets, as shown in Figure 1. Figure 1: Evolution of KAOPEN for Different Income Groups. Source: Chinn-Ito.

Joshua Aizenman, Rajeswari Sengupta, 15 November 2011Emerging markets face what some economists are calling a trilemma. They cannot simultaneously target exchange-rate stability, conduct an independent monetary policy, and have full financial integration. So what to do? This column looks at how Asia’s giants are responding – and in different ways.Full Article: The trilemma in China and India

These topics are the subject of two special issues, the first in IMF Staff Papers, and the second in the Review of International Economics.

I organized the International Economics and Finance Society panel on "Financial Integration and Global Rebalancing" at the Allied Social Sciences Association meetings in Chicago. In the end, the papers fit together much better than I had anticipated; they all dealt with with the factors driving the puzzling pattern of current account balances -- and how policy can possibly influence those patterns.

We know that in the aftermath of combined housing busts, financial crises, and recessions, recoveries are typically modest if not halting, even if the recession is deep.

Paul Tucker, deputy governor for financial stability, raised the possibility in front of MPs after saying the Bank could be doing more to help the economy, including measures to boost lending to small businesses. Negative interest rates would mean high street lenders paying the central bank to place their money with it. The move would be intended to encourage more lending to businesses and households. But it could also lead to a reduction in the interest paid on individual savers’ accounts held with high street banks.

That was the title of a conference in Beijing (October 21st), organized by the Central University of Finance and Economics (CUFE), Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), and the German