Impossible trinity
Definition. The impossible trinity is the principle that a country cannot simultaneously maintain a fixed or managed exchange rate, free movement of capital, and an independent monetary policy, and must give up one of the three. Pursuing all three at once leads to inconsistencies that cannot be sustained.
Because Singapore chooses to manage its exchange rate and permit free capital flows, it gives up independent control of domestic interest rates, which are largely determined by global market conditions.
This term belongs to Singapore's Monetary Policy (MAS) in A Level Economics. Read the full chapter for the diagrams, worked examples and exam technique.
Want to use impossible trinity for marks in the exam? Learn it in class or message the team.