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Chapter 19 International Monetary Regimes

Chapter Objectives

By the end of this chapter, students should be able to:

  1. Define the impossible trinity, or trilemma, and explain its importance.
  2. Identify the four major types of international monetary regimes and describe how they differ.
  3. Explain how central banks manage the foreign exchange (FX) rate.
  4. Explain the benefits of fixing the FX rate, or keeping it within a narrow band.
  5. Explain the costs of fixing the FX rate, or keeping it in a narrow band.