Glossary - ChicksX

Impossible Trinity is a principle in economics stating that a country cannot simultaneously achieve free capital flow, a fixed exchange rate, and an independent monetary policy.

Impossible Trinity is a concept in international economics highlighting the challenge of achieving three policy goals at once. A country can only choose two out of the following free capital flow, a fixed exchange rate, and an independent monetary policy. This principle suggests that if a nation tries to maintain a stable currency value while allowing capital to move freely, it must give up control over its interest rates. Understanding this helps explain why countries face trade-offs in their economic policies.