The Possible Trinity: Critical Notes on the Mundell-Fleming Monetary Policy Trilemma

The classical Mundell-Fleming trilemma, which posits the impossibility of simultaneously achieving a fixed exchange rate, free capital movement, and an independent monetary policy, is being re-examined empirically in the context of stable hybrid regimes. The Russian case (2014–2024) is of particular scientific interest, as it demonstrates the long-term viability of a model that formally violates the classical postulates in the face of sanctions, multi-directional fiscal and monetary policies, and active exchange rate management. The goal of the study is to identify the mechanisms for the sustainability of such violations of the trilemma, using the example of Russia, in a comparative perspective with the experience of Thailand and Malaysia. It also aims to develop a theoretical modification of the concept. The methodological basis is a combined approach that integrates a comparative analysis of macroeconomic indicators, an institutional analysis of the interaction between monetary and fiscal authorities, using the concept of institutional flexibility, econometric methods for identifying structural gaps, and counterfactual risk modeling. The results of the study revealed three key factors of the sustainability of the Russian model: sanctions-induced autarky, which artificially limited capital mobility; structural rent dependence, which ensured a current account surplus of $ 107 billion in 2022; and reactive coordination between the Central Bank of the Russian Federation and the Ministry of Finance, manifested in the growth in the correlation of their decisions during the post-sanction period. The Russian hybrid regime qualitatively differs from its Asian counterparts in its transformation of sanctions and administrative barriers into a permanent institutions and the system-forming role of geopolitical confrontation. The study substantiates the need to expand the classical trilemma and proposes a “geo-economic trilemma” where independent monetary policy is replaced by a coordinated one, free capital flows by sanctions-managed flows. It also replaces a floating exchange rate with an administrative-market hybrid system. While the model has proven to be resilient in extreme conditions, its long-term viability depends on overcoming structural imbalances and institutionalizing coordination without suppressing the independence of the central bank. 

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