IMF Working Papers

A Medium-Scale DSGE Model for the Integrated Policy Framework

By Tobias Adrian, Vitor Gaspar, Francis Vitek

January 28, 2022

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Tobias Adrian, Vitor Gaspar, and Francis Vitek. A Medium-Scale DSGE Model for the Integrated Policy Framework, (USA: International Monetary Fund, 2022) accessed September 20, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper jointly analyzes the optimal conduct of monetary policy, foreign exchange intervention, fiscal policy, macroprudential policy, and capital flow management. This policy analysis is based on an estimated medium-scale dynamic stochastic general equilibrium (DSGE) model of the world economy, featuring a range of nominal and real rigidities, extensive macrofinancial linkages with endogenous risk, and diverse spillover transmission channels. In the pursuit of inflation and output stabilization objectives, it is optimal to adjust all policies in response to domestic and global financial cycle upturns and downturns when feasible—including foreign exchange intervention and capital flow management under some conditions—to widely varying degrees depending on the structural characteristics of the economy. The framework is applied empirically to four small open advanced and emerging market economies.

Subject: Balance of payments, Capital flow management, Consumption, Financial institutions, Foreign exchange, Foreign exchange intervention, Inflation, Mortgages, National accounts, Prices

Keywords: Africa, Capital flow management, Capital Flow Management, Consumption, Dynamic Stochastic General Equilibrium Model, Fiscal Policy, Foreign exchange intervention, Foreign Exchange Intervention, Global, Inflation, Macroprudential Policy, Monetary Policy, Mortgages, Policy rule parameter, Policy rule response coefficient, Policy transmission mechanisms, Price inflation, Scenario assumption, Small Open Economy

Publication Details

  • Pages:

    99

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2022/015

  • Stock No:

    WPIEA2022015

  • ISBN:

    9781616359706

  • ISSN:

    1018-5941

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