Integrated Policy Framework

Overview

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.

Related Links

Policy Paper: Toward an Integrated Policy Framework
August 8, 2020
Towards an Integrated Policy Framework for Open Economies
Managing Capital Flows: What is the Right Policy Mix?
Navigating Capital Flows—An Integrated Approach

IMF Research on Integrated Policy Framework

Integrated Policy Framework—Principles for the Use of Foreign Exchange Intervention
December 21, 2023

IMF Policy Paper

Toward an Integrated Policy Framework
August 8, 2020

IMF Policy Paper

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

IMF Working Paper

Integrated Monetary and Financial Policies for Small Open Economies
August 4, 2023

IMF Working Paper

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

IMF Working Paper

A Quantitative Microfounded Model for the Integrated Policy Framework
December 17, 2021

IMF Working Paper

An Estimated DSGE Model for Integrated Policy Analysis
June 30, 2023

IMF Working Paper

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

IMF Working Paper

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

IMF Working Paper

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

IMF

U.S. or Domestic Monetary Policy: Which Matters More for Financial Stability?

March 2020
IMF Economic Review, Palgrave Macmillan, International Monetary Fund, vol. 68(1)

International Spillovers and Local Credit Cycles

Revised in October 2019
NBER Working Paper, Issued in February 2017

Empirical Analysis

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

IMF Working Paper

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

IMF Working Paper

One Shock, Many Policy Responses
January 17, 2020

IMF Working Paper

US Monetary Policy and International Risk Spillovers

Proceedings of the 2019 Jackson Hole Symposium, forthcoming

Facing the Tides: Managing Capital Flows in Asia
August 22, 2019

IMF Departmental Paper

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

IMF Working Paper

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

IMF Working Paper

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

IMF Working Paper

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

IMF Working Paper

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

IMF Working Paper

Patterns of FXI under Inflation Targeting Countries
May 29, 2020

IMF Working Paper

Endogenous Corporate Leverage Response to a Safer Macro Environment: The Case of Foreign Exchange Reserve Accumulation

December 2019
NBER Working Paper

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

IMF Working Paper

Unveiling the Effects of Foreign Exchange Intervention: A Panel Approach

September 2019
Emerging Markets Review, Volume 40

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

IMF Working Paper

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

IMF Working Paper

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

IMF Working Paper

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

IMF Working Paper

Credit Cycles and Capital Flows: Effectiveness of the Macroprudential Policy Framework in Emerging Market Economies

June 2017
Journal of Banking & Finance, Volume 79

Capital Controls: A Survey of the New Literature

December 2019
NBER Working Paper

Capital Controls: Theory and Evidence

November 2019
NBER Working Paper

Capital Flow Deflection

March 2017
Journal of International Economics, Volume 105

Domestic and Multilateral Effects of Capital Controls in Emerging Markets

November 2018
Journal of International Economics, Volume 115

Estimated Policy Rules for Capital Controls
June 6, 2020

IMF Working Paper

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

IMF Working Paper

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

IMF Working Paper

One Shock, Many Policy Responses
January 17, 2020

IMF Working Paper

US Monetary Policy and International Risk Spillovers

Proceedings of the 2019 Jackson Hole Symposium, forthcoming

Facing the Tides: Managing Capital Flows in Asia
August 22, 2019

IMF Departmental Paper

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

IMF Working Paper

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

IMF Working Paper

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

IMF Working Paper

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

IMF Working Paper

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

IMF Working Paper

Patterns of FXI under Inflation Targeting Countries
May 29, 2020

IMF Working Paper

Endogenous Corporate Leverage Response to a Safer Macro Environment: The Case of Foreign Exchange Reserve Accumulation

December 2019
NBER Working Paper

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

IMF Working Paper

Unveiling the Effects of Foreign Exchange Intervention: A Panel Approach

September 2019
Emerging Markets Review, Volume 40

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

IMF Working Paper

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

IMF Working Paper

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

IMF Working Paper

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

IMF Working Paper

Credit Cycles and Capital Flows: Effectiveness of the Macroprudential Policy Framework in Emerging Market Economies

June 2017
Journal of Banking & Finance, Volume 79

Capital Controls: A Survey of the New Literature

December 2019
NBER Working Paper

Capital Controls: Theory and Evidence

November 2019
NBER Working Paper

Capital Flow Deflection

March 2017
Journal of International Economics, Volume 105

Domestic and Multilateral Effects of Capital Controls in Emerging Markets

November 2018
Journal of International Economics, Volume 115

Estimated Policy Rules for Capital Controls
June 6, 2020

IMF Working Paper

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