| Summary: | 碩士 === 東吳大學 === 國際經營與貿易學系 === 107 === The study uses the three indicators of the “Impossible Trinity” framework: currency autonomy, free movement of capital, and stable exchange rate to examine Taiwan’s exchange rate configuration. By adopting Aizenman and Ito (2009), and Tsai(2004), we have tried to analyze the three indicators based on the “trilemma” hypothesis first made by Mundell (1963). The hypothesis states that a country simultaneously may choose any two, but not all, of the three goals of monetary independence, exchange rate stability, and financial integration to the full extent.
The outcomes ratify that Taiwan’s exchange rates are stable with a high level of financial openness but the monetary policy modifies depending on certain currency change. The results indicate that though Taiwan’s case ratifies the “Impossible Trinity” hypothesis, the central bank’s monetary decision weighs on the US currency flucation to optimize the monetary policy.
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