Economia Interativalearn by doing
The capybara earned her wings

Trilemma Skies

Take the controls. Question the radio. Know which goal to give up.

Your best
0 badges
Route 1 of 3The promise of the peg
one life0 / 3 badges

Set your goals and get ready to fly.

↑ ↓ fly · 1 2 3 goals
↑ ↓ fly1 2 3 goalsR restart
One wrong choice can bring the capybara down.

Your flight contract

Cockpit radio · the advisor can be wrong

“Three goals sound better than two… but the panel has its limits.”

The little pilot’s handbook

The capybara flies a helicopter and runs an economic regime. The flight moves forward on its own; you choose the altitude and the goals.

  1. Fly: hold ↑ / ↓ or W / S. On a phone, hold the flight buttons.
  2. Set up: 1 = fixed exchange rate; 2 = free capital flows; 3 = monetary autonomy. The panel buttons do the same.
  3. Read the mission contract: any pair is a possible combination in the idealized trilemma; the mission may require a specific pair. Set that pair before the first fork.
  4. Pick the right passage: at each fork, one answer takes the upper lane and the other the lower lane. They swap places between attempts. Steer the helicopter’s cabin into the lane you choose. The options also appear on the panel.
  5. Avoid red clouds: one collision ends the attempt. During a fork, the game clears away the dangerous clouds so you can read and decide.
  6. Question the radio: the advisor alternates good advice with impossible promises. Switching on all three goals at once means defeat — even before takeoff.
Mind the middle: fly through the center of one lane. Flying over the dividing line doesn’t count as a choice. It takes three right answers to land; each one earns a consistency badge.

R restarts the route with zero badges. Routes you’ve already completed stay available. P or Esc pauses; Enter confirms the current screen. You can look through the notebook while the flight is paused.

Practice: ten seconds per fork, little turbulence and a warning before takeoff if your pair doesn’t meet the contract. Challenge: five seconds, more clouds and wind, no warning. Both require the same economic decisions. You can change the difficulty on each route’s preflight screen.

During the flight, the side panel explains each right answer without stopping the game, and when you land you get a summary of the route’s three decisions. If you’d rather pause for the explanation after each right answer, turn on “Pause after each discovery” on the start screen. Sound is optional; your best score is saved on this device when the browser allows it.

The pilot’s notebook

The Mundell–Fleming trilemma, also called the impossible trinity, describes the incompatibility of three goals in their full form: a fixed exchange rate, free capital mobility and monetary policy autonomy. You can combine two by giving up the third.

Pair chosenWhat you give upWhat it meansExamples
Fixed rate + free capital flowsMonetary autonomyMonetary policy has to be consistent with defending the peg.Hong Kong, with its currency pegged to the dollar since 1983; eurozone countries
Free capital flows + autonomyFixed exchange rateThe exchange rate can adjust to capital flows and to monetary policy.Brazil since 1999; the United States; the United Kingdom
Fixed rate + autonomyFree capital mobilityEffective restrictions on capital flows reduce the arbitrage that would rule out this combination.Bretton Woods (1944–1971); China for many years
“Two” doesn’t mean “any pair wins any mission.” All three pairs are possibilities in the idealized trilemma. Each flight contract sets different priorities. In the game, switching a goal off declares that you give it up, and switching a goal on declares a commitment to keep it.

Route 1 · defending the peg with free capital flows

If the currency comes under depreciation pressure and the central bank wants to hold the peg, it can sell foreign currency from its reserves and take in domestic currency. Without sterilization, the monetary base shrinks. Defending the peg limits how independently monetary policy can be run.

In the polar case of perfect capital mobility, a stable expected exchange rate and no risk premium, arbitrage rules out a persistent return differential: i = i*. An attempt to lower domestic interest rates independently triggers capital outflows and pressure on the peg; unsterilized intervention reverses the monetary expansion.

Route 2 · monetary policy with a floating exchange rate

In classic Mundell–Fleming with perfect capital mobility, a monetary expansion initially pushes interest rates down and triggers capital outflows. The currency depreciates; through the model’s net-export function, NX rises and output grows. The exchange-rate adjustment makes the monetary expansion sustainable.

A fiscal expansion, with the money supply held constant, attracts capital and appreciates the currency. The drop in NX offsets the fiscal boost to output in the polar case. This is not a universal result for every degree of mobility, regime or real economy.

Monetary autonomy doesn’t mean you can pick any interest rate forever. Even with a floating exchange rate, the equilibrium in the classic case with perfect mobility can have i = i*. Autonomy is about monetary policy; the exchange rate and output do the adjusting.

Route 3 · a fixed exchange rate with monetary autonomy

To keep these two goals, you have to give up unrestricted capital mobility. Effective controls limit arbitrage and can widen the room for monetary policy decisions. This does not mean complete isolation or guaranteed stability. Foreign trade, expectations and how effective the controls are still matter; reserves don’t become infinite.

What the game’s metaphors mean

The third switch
Stands for trying to promise all three goals in full at the same time. The instant defeat is a teaching rule, not a prediction that every real economy collapses on the spot.
The radio
Stands for tempting recommendations that ignore the regime’s constraints. Some messages are right; others mix incompatible goals.
The forks
Test conditional mechanisms, not a moral preference for one policy. The position of the right answer changes between attempts.
The clouds
Are flying obstacles inspired by external shocks. They are not an equation or an economic diagnosis.
The triangle
Shows binary, extreme commitments. Real countries can combine partial goals, intermediate regimes and different degrees of capital mobility.
Model assumptions and limits

Small open economy, domestic prices fixed over the model’s horizon and, in the polar cases, perfect capital mobility, comparable assets and no risk premium. The questions state when they assume no sterilization. The exchange-rate effect on NX follows the model’s usual function; the game doesn’t simulate trade lags or a J-curve. The controls route illustrates the trilemma without automatically applying the perfect-mobility results to it.

Don’t confuse monetary autonomy with fiscal autonomy, or capital mobility with free trade in goods. The game doesn’t compute a calibrated path for GDP, interest rates or reserves: the answers are conditional, qualitative mechanisms.

A current debate: trilemma or dilemma?

Hélène Rey (2013) argues that the global financial cycle, shaped in large part by U.S. monetary policy, turns the trilemma into a dilemma: even with a floating exchange rate, independent monetary policy would only be possible if the capital account were managed, directly or indirectly — for example, with macroprudential measures.

Further reading

Flight report