IMF Working Papers

An Integrated Policy Framework (IPF) Diagram for International Economics

By Suman S Basu, Gita Gopinath

February 23, 2024

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Format: Chicago

Suman S Basu, and Gita Gopinath. An Integrated Policy Framework (IPF) Diagram for International Economics, (USA: International Monetary Fund, 2024) accessed November 21, 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

The Mundell-Fleming IS-LM approach has guided generations of economists over the past 60 years. But countries have experienced new problems, the international finance literature has advanced, and the composition of the global economy has changed, so the scene is set for an updated approach. We propose an Integrated Policy Framework (IPF) diagram to analyze the use of multiple policy tools as a function of shocks and country characteristics. The underlying model features dominant currency pricing, shallow foreign exchange (FX) markets, and occasionally-binding external and domestic borrowing constraints. Our diagram includes the use of monetary policy, FX intervention, capital controls, and domestic macroprudential measures. It has four panels to explore four key trade-offs related to import consumption, home goods consumption, the housing market, and monetary policy. Our extended diagram adds fiscal policy into the mix.

Subject: Exchange rate arrangements, Exchange rates, External debt, Foreign exchange, Imports, International trade, Land prices, Prices

Keywords: Borrowing constraint, Capital controls, Exchange rate arrangements, Exchange rates, Fiscal policy, Foreign exchange intervention, FX intervention, Global, Imports, Integrated policy framework, International economics, IPF diagram, Land prices, Macroprudential policy, Monetary policy, Shallow foreign exchange, Supply curve

Publication Details

  • Pages:

    122

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2024/038

  • Stock No:

    WPIEA2024038

  • ISBN:

    9798400268274

  • ISSN:

    1018-5941

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