The discussion on capital flows and monetary policy inevitably begins with the well-known “trilemma” or the impossible trinity in the sense that a country can choose no more than two of the following three features of its policy regime: (1) free capital mobility across borders, (2) a fixed exchange rate, and (3) an independent monetary policy.
In my view, the topic of this conference is well chosen. The crisis and the great uncertainties it has brought on have made the pursuit of financial stability all the more urgent. For this reason I am delighted that so many of you have been able to accept the Bundesbank’s invitation to discuss this sensitive issue.