Chapter 11: An Empirical Analysis of the Trilemma of Exiting Expansionary Monetary Policy in the Euro Area

This study proposes a theoretic trilemma model for the case of a monetary union and measures it empirically. Accordingly, there exists a trade-off between stabilizing the monetary union, maintaining free capital mobility, and exiting expansionary monetary policy in the euro area. Our results underscore the existence of this trilemma and point out the importance of resolving it without jeopardizing the euro and financial stability in the European Union.