In the late 1990s, several East Asian economies had their currencies pegged to the U. S. dollar. Suppose there is an economic boom in the
United States that leads to an increase in U. S. interest rates. At the same time, investors begin to worry that the East Asian economies will
be unable to maintain their exchange rate pegs. How could policy makers in these countries respond? What are the pros and cons of these options? Discuss how the policy trilemma applies to this situation.