The trilemma policies and macroeconomic volatility in Central and Eastern Europe

In this paper we search for evidence on the consequences of the trilemma policies on the volatility of macroeconomic variables in selected CEE countries, members of European Union. This problem gained a significant importance during recent financial crisis, when countries in this part of the world were confronted with uncertainty regarding their macroeconomic evolution. We use the trilemma indexes built by Aizenman, Chinn and Ito (2011) to test the consequences of the policies on the inflation and output volatility. Our results show that capital mobility has a positive impact on reducing the macroeconomic volatility in Central and Eastern Europe. (C) 2014 The Authors. Published by Elsevier B.V.