A Medium-Scale DSGE Model for the Integrated Policy Framework

Author/Editor:

Tobias Adrian ; Vitor Gaspar ; Francis Vitek

Publication Date:

January 28, 2022

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

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.

Series:

Working Paper No. 2022/015

Frequency:

regular

English

Publication Date:

January 28, 2022

ISBN/ISSN:

9781616359706/1018-5941

Stock No:

WPIEA2022015

Pages:

99

Please address any questions about this title to publications@imf.org