A Medium-Scale DSGE Model for the Integrated Policy Framework

Tobias Adrian, Vitor Gaspar and Francis Vitek

No 2022/015, IMF Working Papers from International Monetary Fund

Abstract: 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.

Keywords: Monetary Policy; Foreign Exchange Intervention; Fiscal Policy; Macroprudential Policy; Capital Flow Management; Dynamic Stochastic General Equilibrium Model; Small Open Economy; Policy transmission mechanisms; price inflation; scenario assumption; policy rule parameter; policy rule response coefficient; Mortgages; Consumption; Foreign exchange intervention; Inflation; Capital flow management; Global; Africa (search for similar items in EconPapers)
Pages: 99
Date: 2022-01-28
New Economics Papers: this item is included in nep-cba, nep-dge, nep-fdg, nep-mac, nep-mon and nep-opm
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Journal Article: A Medium-Scale DSGE Model for the Integrated Policy Framework (2024)
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