The impossible trinity in international economics explains the challenges countries face when attempting to achieve three key objectives for economic stability.
The first objective is a fixed exchange rate, which means keeping the domestic currency pegged to another currency, such as the U.S. dollar, or a basket of currencies. The second objective is free capital movement, allowing financial capital to flow freely across borders without restrictions. The third objective is to maintain independent monetary policy, retaining control over domestic interest rates and other monetary tools to influence the national economy.
