Many of them had used a pegged exchange rate to bring inflation down from triple digit levels. It was then that the power of the impossible trinity – of the combination of a pegged exchange rate, free capital movements, and a monetary policy dedicated to domestic goals – became clear, and that a series of financial crises erupted.
Further, as the financial crises of that decade unfolded, it also became evident that the impossible trinity should be amended to say that the combination of a pegged exchange rate, free capital movements, and macroeconomic policy – not just monetary policy – dedicated to domestic goals was not possible.