We study the trilemma configuration of the Turkish economy for the period 2002–11. This
includes calculating the trilemma indices and regressing them on a constant following
Aizenman et al.(2008). Yet we extend this approach by applying a Kalman filter to the
classical linear regression to capture the time-varying importance of policy decisions. Next,
we reveal the role of central bank foreign reserves and required reserves in mitigating
trilemma tradeoffs through their relation with trilemma residuals in a vector autoregression …

We study the trilemma conguration of the Turkish economy for the period between 2002 and
2012. The paper starts by empirically testing the Mundell-Fleming theoretical concept of
an\impossible trinity"(trilemma) for Turkey, following Aizenman, Chinn and Ito (ACI, 2008).
This includes calculating the trilemma indices and regressing them on a constant. We show
that there is a misspecication with ACI approach and improve the specication by applying a
Kalman lter to the classical linear regression that enables us to capture the time-varying …