What is the Integrated Policy Framework?

IMF’s research on a new analytical approach to help countries respond to fluctuations in international capital flows


Cross-border capital flows provide significant benefits but may also generate or amplify shocks. Small open economies can be particularly vulnerable to swings in international capital flows. How should they respond? The traditional answer has been to use flexible exchange rates as a shock absorber. But flexible exchange rates may not offer full insulation from external shocks, for example, when financial markets do not work perfectly.

As a result, policy makers often reach for a mix of tools including intervention in the currency market, and macroprudential and capital flow management measures. These policy responses vary substantially across countries and over time. A significant shortcoming of this eclectic approach is the lack of clear frameworks.

Over the course of 2019 and 2020, IMF staff has made a major push to develop
conceptual and quantitative models taking greater account of real-life frictions and vulnerabilities to guide how these tools should be used in an integrated way, as explained in a recent IMF blog. The modeling effort is also being complemented by extensive empirical analysis and country case studies. The combined work should provide useful insights to policy makers on when and how to deploy multiple tools with special attention to their interactions, country-specific characteristics, initial conditions and the nature of the shocks. The policy paper that was published in October 2020 summarizes key analytical findings from staff’s work under the Integrated Policy Framework umbrella.


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Policy Papers

Toward an Integrated Policy Framework
IMF Policy Paper, October 8, 2020

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Modeling Work

A Conceptual Model for the Integrated Policy Framework
IMF Working Paper, July 7, 2020

A Quantitative Model for the Integrated Policy Framework
IMF Working Paper, July 7, 2020

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Monetary Policy Frameworks

Monetary Policy Frameworks: An Index and New Evidence
IMF Working Paper, January 28, 2022

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Country Experiences

Caught in the Crosswinds: The Experiences of Selected Economies Responding to External Volatility with Multiple Policy Levers
IMF Working Paper, November 8, 2020

Foreign Exchange Intervention in Inflation Targeters in Latin America
IMF, August 27, 2019

U.S. or Domestic Monetary Policy: Which Matters More for Financial Stability?
IMF Economic Review, Palgrave Macmillan, International Monetary Fund, vol. 68(1), March 2020

International Spillovers and Local Credit Cycles
NBER Working Paper, Issued in February 2017, Revised in October 2019


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Empirical Analysis

Policy Mix in the Face of Capital Flow Volatility

Managing External Volatility: Policy Frameworks in Non-Reserve Issuing Economies
IMF Working Paper, December 18, 2020

Capital Flows at Risk: Taming the Ebbs and Flows
IMF Working Paper, December 20, 2019

One Shock, Many Policy Responses
IMF Working Paper, January 17, 2020

US Monetary Policy and International Risk Spillovers
Proceedings of the 2019 Jackson Hole Symposium, forthcoming

Facing the Tides: Managing Capital Flows in Asia
IMF Departmental Paper, October 22, 2019

Leaning Against the Wind: An Empirical Cost-Benefit Analysis
IMF Working Paper, July 7, 2020

Exchange Rate Adjustment and Foreign Exchange Intervention

Foreign Exchange Intervention: A Dataset of Public Data and Proxies
IMF Working Paper, February 19, 2021

Do FX Interventions Lead to Higher FX Debt? Evidence from Firm-Level Data
IMF Working Paper, September 25, 2020

Destabilizing Stability? Exchange Rate Arrangements and Foreign Currency Debt
IMF Working Paper, August 28, 2020

Intervention under Inflation Targeting—When Could It Make Sense?
IMF Working Paper, January 17, 2020

Patterns of FXI under Inflation Targeting Countries
IMF Working Paper, May 29, 2020

Endogenous Corporate Leverage Response to a Safer Macro Environment: The Case of Foreign Exchange Reserve Accumulation
NBER Working Paper, December 2019

Real Exchange Rate Overshooting in Large Depreciation Episodes: Determinants and Consequences
IMF Working Paper, May 22, 2020

Unveiling the Effects of Foreign Exchange Intervention: A Panel Approach
Emerging Markets Review, Volume 40, September 2019

Effects of Macroprudential Policy

Exchange Rates and Domestic Credit—Can Macroprudential Policy Reduce the Link?
IMF Working Paper, September 11, 2020

Digging Deeper – Evidence on the Effect of Macroprudential Policies from a New Database
IMF Working Paper, March 22, 2019

Effects of Macro Prudential Policy: Evidence from Over 6,000 Estimates
IMF Working Paper, May 22, 2020

Dampening Global Financial Shocks in Emerging Markets: Can Macroprudential Regulations Help?
IMF Working Paper, June 26, 2020

Credit Cycles and Capital Flows: Effectiveness of the Macroprudential Policy Framework in Emerging Market Economies
Journal of Banking & Finance, Volume 79, June 2017

Macroprudential Policy: What We’ve Learned, Don’t Know, and Need to Do
AEA Papers and Proceedings, Vol. 109, May 2019

Capital Flow Management Measures

Capital Controls: A Survey of the New Literature
NBER Working Paper, December 2019

Capital Controls: Theory and Evidence
NBER Working Paper, November 2019 

Capital Flow Deflection
Journal of International Economics, Volume 105, March 2017

Domestic and Multilateral Effects of Capital Controls in Emerging Markets
Journal of International Economics, Volume 115, November 2018

Estimated Policy Rules for Capital Controls
IMF Working Paper, June 6, 2020