Monetary Sovereignty, Exchange Rates, and Capital Controls: The Trilemma in the Interwar Period

The interwar period was marked by the end of the classical gold standard regime and new levels of macroeconomic disorder in the world economy. The interwar disorder often is linked to policies inconsistent with the constraint of the open-economy trilemmathe inability of policymakers simultaneously to pursue a fixed exchange rate, open capital markets, and autonomous monetary policy. The first two objectives were linchpins of the pre-1914 order. As increasingly democratic polities faced pressures to engage in domestic macroeconomic management, however, either currency pegs or freedom of capital movements had to yield. This historical analytic narrative is compellingwith significant ramifications for today's world, if truebut empirically controversial. We apply theory and empirics to the interwar data and find strong support for the logic of the trilemma. Thus, an inability to pursue consistent policies in a rapidly changing political and economic environment appears central to an understanding of the interwar crises, and the same constraints still apply today.

The Trilemma in History: Tradeoffs among Exchange Rates, Monetary Policies, and Capital Mobility

The exchange-rate regime is often seen as constrained by the monetary policy trilemma, which imposes a stark tradeoff among exchange stability, monetary independence, and capital market openness. Yet the trilemma has not gone without challenge. Some (e.g., Calvo and Reinhart 2001, 2002) argue that under the modern float there could be limited monetary autonomy. Others (e.g., Bordo and Flandreau 2003), that even under the classical gold standard domestic monetary autonomy was considerable. This paper studies the coherence of international interest rates over more than 130 years. The constraints implied by the trilemma are largely borne out by history.

Monetary Sovereignty, Exchange Rates, and Capital Controls: The Trilemma in the Interwar period

The interwar period was marked by the end of the classical gold standard regime and new levels of macroeconomic disorder in the world economy. The interwar disorder often is linked to policies inconsistent with the constraint of the open-economy trilemma the inability of policymakers simultaneously to pursue a fixed exchange rate, open capital markets, and autonomous monetary policy. The first two objectives were linchpins of the pre-1914 order. As increasingly democratic polities faced pressures to engage in domestic macroeconomic management, however, either currency pegs or freedom of capital movements had to yield. This historical analytic narrative is compelling with significant ramifications for today's world, if true but empirically controversial. We apply theory and empirics to the interwar data and find strong support for the logic of the trilemma. Thus, an inability to pursue consistent policies in a rapidly changing political and economic environment appears central to an understanding of the interwar crises, and the same constraints still apply today.

Financial Stability, the Trilemma, and International Reserves

The rapid growth of international reserves, a development concentrated in the emerging markets, remains a puzzle. In this paper, we suggest that a model based on financial stability and financial openness goes far toward explaining reserve holdings in the modern era of globalized capital markets. The size of domestic financial liabilities that could potentially be converted into foreign currency (M2), financial openness, the ability to access foreign currency through debt markets, and exchange rate policy are all significant predictors of reserve stocks. Our empirical financial-stability model seems to outperform both traditional models and recent explanations based on external short-term debt

Financial Stability, the Trilemma, and International Reserves

The rapid growth of international reserves---a development concentrated in the emerging markets---remains a puzzle. In this paper we suggest that a model based on financial stability and financial openness goes far toward explaining reserve holdings in the modern era of globalized capital markets. The size of domestic financial liabilities that could potentially be converted into foreign currency (M2), financial openness, the ability to access foreign currency through debt markets, and exchange rate policy are all significant predictors of reserve stocks. Our empirical financial-stability model seems to outperform both traditional models and recent explanations based on external short-term debt.

Financial Instability, Reserves, and Central Bank Swap Lines in the Panic of 2008

In this paper we connect the events of the last twelve months, "The Panic of 2008" as it has been called, to the demand for international reserves. In previous work, we have shown that international reserve demand can be rationalized by a central bank's desire to backstop the broad money supply to avert the possibility of an internal/external double drain (a bank run combined with capital flight). Thus, simply looking at trade or short-term debt as motivations for reserve holdings is insufficient; one must also consider the size of the banking system (M2). Here, we show that a country's reserve holdings just before the current crisis, relative to their predicted holdings based on these financial motives, can significantly predict exchange rate movements of both emerging and advanced countries in 2008. Countries with large war chests did not depreciate -- and some appreciated. Meanwhile, those who held insufficient reserves based on our metric were likely to depreciate. Current account balances and short-term debt levels are not statistically significant predictors of depreciation once reserve levels are taken into account. Our model's typically high predicted reserve levels provide important context for the unprecedented U.S. dollar swap lines recently provided to many countries by the Federal Reserve.

High Temperature Evaluation of an Active Clearance Control System Concept

A mechanically actuated blade tip clearance control concept was evaluated in a nonrotating test rig to quantify secondary seal leakage at elevated temperatures. These tests were conducted to further investigate the feasibility of actively controlling the clearance between the rotor blade tips and the surrounding shroud seal in the high pressure turbine (HPT) section of a turbine engine. The test environment simulates the state of the back side of the HPT shroud seal with pressure differentials as high as 120 psig and temperatures up to 1000 F. As expected, static secondary seal leakage decreased with increasing temperature. At 1000 F, the test rig's calculated effective clearance (at 120 psig test pressure) was 0.0003 in., well within the industry specified effective clearance goal

Further Characterization of an Active Clearance Control Concept

A new test chamber and precision hydraulic actuation system were incorporated into an active clearance control (ACC) test rig at NASA Glenn Research Center. Using the improved system, a fast-acting, mechanically-actuated, ACC concept was evaluated at engine simulated temperatures and pressure differentials up to 1140 F and 120 psig, on the basis of secondary seal leakage and kinematic controllability. During testing, the ACC concept tracked a simulated flight clearance transient profile at 1140 F, 120 psig, with a maximum error of only 0.0012 in. Comparison of average dynamic leakage of the system with average static leakage did not show significant differences between the two operating conditions. Calculated effective clearance values for the rig were approximately 0.0002 in. at 120 psig, well below the industry specified effective clearance threshold of 0.001 in

Dynamic manipulation of droplets using mechanically tunable microtextured chemical gradients

Materials and strategies applicable to the dynamic transport of microdroplets are relevant to surface fluidics, self-cleaning materials, thermal management systems, and analytical devices. Techniques based on electrowetting, topographic micropatterns, and thermal/chemical gradients have advanced considerably, but dynamic microdroplet transport remains a challenge. This manuscript reports the fabrication of mechano-tunable, microtextured chemical gradients on elastomer films and their use in controlled microdroplet transport. Specifically, discreet mechanical deformations of these films enabled dynamic tuning of the microtextures and thus transport along surface-chemical gradients. The interplay between the driving force of the chemical gradient and the microtopography was characterized, facilitating accurate prediction of the conditions (droplet radius and roughness) which supported transport. In this work, the use of microtextured surface chemical gradients in mechano-adaptive materials with microdroplet manipulation functionality was highlighted. https://doi.org/10.1038/s41467-021-23383-7 OPEN

Seal Investigations of an Active Clearance Control System Concept

In an effort to improve upon current thermal active clearance control methods, a first generation, fast-acting mechanically actuated, active clearance control system has been designed and installed into a non-rotating test rig. In order to harvest the benefit of tighter blade tip clearances, low-leakage seals are required for the actuated carrier segments of the seal shroud to prevent excessive leakage of compressor discharge (P3) cooling air. The test rig was designed and fabricated to facilitate the evaluation of these types of seals, identify seal leakage sources, and test other active clearance control system concepts. The objective of this paper is to present both experimental and analytical investigations into the nature of the face-seal to seal-carrier interface. Finite element analyses were used to examine face seal contact pressures and edge-loading under multiple loading conditions, varied E-seal positions and two new face seal heights. The analyses indicated that moving the E-seal inward radially and reducing face seal height would lead to more uniform contact conditions between the face seal and the carriers. Lab testing confirmed that moving the balance diameter inward radially caused a decrease in overall system leakage