Quantitative Easing and the New Monetary Trinity: Systematic Reviews Analysis
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Abstract
Amid the global financial crisis caused by the COVID-19 pandemic, central banks in many countries implemented quantitative easing (QE) by purchasing government bonds and other securities to stabilize macroeconomic conditions. In addition to inflation control, financial stability has become a critical policy objective. This study explores the transformation from the “impossible trinity” to the “new monetary trinity,” which redefines the balance between exchange rate stability, financial openness, and monetary independence. Employing a Systematic Literature Review (SLR) combined with bibliometric analysis, 146 publications from ScienceDirect and Scopus (2020 to 2023) were examined using VOSviewer and Microsoft Excel. The findings reveal distinct methodological preferences. Dynamic Stochastic General Equilibrium (DSGE) models were found to be dominant in advanced economies, while Vector Autoregression (VAR), Autoregressive Distributed Lag (ARDL), and Vector Error Correction Models (VECM) have been more commonly applied in emerging markets. Evidence indicates that quantitative easing plays a significant role in managing capital flows, stabilizing exchange rates, and maintaining policy autonomy. However, trade-offs still exist, particularly in small open economies. This study offers structured insights into the effectiveness of quantitative easing within the framework of the new monetary trinity during a global crisis and contributes to the literature by systematically mapping how quantitative easing interacts with the evolving trilemma framework, providing context-specific lessons for post-crisis monetary strategy.
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References
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