The continuing internationalization of capital markets has increased concern about its implications for the conduct of macroeconomic policies (Pilbeam, 2013, p.74). One possible predicament is the impossible trinity, or the principle that a country can pursue only two of the following three options: perfect capital mobility, fixed exchange rates, or autonomous monetary policy (Shambaugh, 2004, p. 302). However, since September 2011, Switzerland has attempted to pursue all three options, continuing an expansionary monetary policy after adopting a minimum exchange rate of 1.20 francs per euro (IMF, 2013, p. 5). In theory, this policy should be rendered ineffective given Switzerland's perfect capital mobility and its fixed exchange rate system (Mundell, 1963, p. 484). Nonetheless, Swiss real GDP still increased between the implementation of the floor in 2011 and the end of monetary expansion in 2012 (OECD). The purpose of this article is to elaborate this inconsistency using the Mundell-Fleming model. First, the structure of the model and its assumptions are explained, as well as the characteristics of the Swiss economy relevant for the analysis. Subsequently, the course of events in Switzerland from 2010 to 2012 will be analyzed and finally discussed in the conclusions. The Mundell-Fleming model is a macroeconomic model that analyzes aggregate demand, developed independently by both Mundell (1963) and Fleming (1962). The most important feature of the Mundell-Fleming model is that it incorporates international capital movements into the IS-LM framework, which is essential considering the worldwide trend towards financial integration (Mundell, 1963, p. 475). The main hypothesis is a small open economy with pe...... middle of paper ......re: Palgrave Macmillan.Ramírez, CD (2001). Even more on monetary policy in a small open economy. International Review of Economics and Finance 10(4), 399-405.Shambaugh, J.C. (2004). The effect of fixed exchange rates on monetary policy. The Quarterly Journal of Economics 119(1), 301-352. Swiss National Bank (2011). Monetary policy assessment of 17 March 2011. Retrieved from the SNB website: http://www.snb.ch/en/mmr/reference/pre_20110317/source/pre_20110317.en.pdfSwiss National Bank (2011). The Swiss National Bank sets the minimum exchange rate at 1.20 francs per euro. Retrieved from the SNB website at: http://www.snb.ch/en/mmr/reference/pre_20110906/source/pre_20110906.en.pdfSwiss National Bank (2014). Monetary policy assessment of 20 March 2014. Retrieved from the SNB website: http://www.snb.ch/en/mmr/reference/pre_20140320/source/pre_20140320.en.pdf