Good Example Of Research Paper On Methods

After 2007-2012 global economy recessions, many nations are striving to sustain their economy stability in the efforts of meeting the respective governments and citizens’ fundamental needs. Primarily, Trilemma of international finance hold that a country or nation cannot concurrently peg the exchange rate, maintain the independent monetary policy and permit free financial flows cross-borders (Feenstra & Taylor, 2008). International finance Trilemma states that under no given scenario that a country will enjoy steady foreign exchange rates, capital mobility and monetary policy that is independent. Based on international finance Trilemma, the central bank is often tasked to ensure that the economy is stable through pursuance of the two policies among the articulated three simultaneously.
Thus, international finance Trilemma implies that a nation can pursue one or two policies in an attempt of stabilizing its economy. For instance, assume the global interest rate is 7%, the central bank of a nation attempts to set its home interest rate at 4% that is lower than the global 7%. The implication in the economy will be home currency depreciation pressure as the investors will tend to sell or dispose of the cheap domestic currency in an aspiration to buy high foreign currency (Copeland, 2005). On the other hand, if Central bank may want have free flows of capital and prevents home currency depreciation it can only sell its reserves foreign currency. Based on finance the central bank reserves are limited, through selling of such reserves will deplete them. As a result, the domestic currency will also depreciate simultaneously. Hence, international finance Trilemma’s three objective policies cannot be pursued by the central bank simultaneously. As a result, the central bank has no option than to forgo or apply the ‘opportunity cost approach’ in the three objectives an exempt one policy and adopted two.