Mundellian-Trilemma depicts that the impossibility of three policy goals, monetary policy independence, open capital market and fixed exchange rate. The depiction of Mundellian-Trilemma appears true under an assumption of zero arbitrage costs across international markets. In practice, however, the transaction costs can be enormous to hinder the capital cross international markets. Hence, by relaxing the assumption of zero arbitrage costs, this paper demonstrates a theoretical possibility of the trilemma in practice.

Keywords: Mundellian Trilemma, Monetary Policy, Open Capital Market, Exchange Rate System