02397cas a2200337 a 4500 AALejournalIMF022241 230101c9999 xx r poo 0 0eng d 5.00 USD 9781616356538 1018-5941 BD-DhAAL BD-DhAAL Adrian, Tobias. A Quantitative Microfounded Model for the Integrated Policy Framework / Tobias Adrian, Christopher Erceg, Marcin Kolasa, Jesper Linde. Washington, D.C. : International Monetary Fund, 2021. 1 online resource (61 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students We develop a microfounded New Keynesian model to analyze monetary policy and financial stability issues in open economies with financial fragilities and weakly anchored inflation expectations. We show that foreign exchange intervention (FXI) and capital flow management tools (CFMs) can improve monetary policy tradeoffs under some conditions, including by reducing the need for procyclical tightening in response to capital outflow pressures. Moreover, they can be used in a preemptive way to reduce the risk of a 'sudden stop' through curbing a buildup in leverage. While these tools can materially improve welfare, mainly by dampening inefficient fluctuations in risk premia, our analysis also highlights potential limitations, including the possibility that their deployment may forestall needed adjustment in the external balance. Finally, our results also emphasize the power of FXIs to provide domestic stimulus in a liquidity trap. Mode of access: Internet Central Banks and Their Policies imf Monetary Policy, FX Intervention and Capital Controls imf Monetary Policy imf Open Economy Macroeconomics imf Quantitative Policy Modeling imf Erceg, Christopher. Kolasa, Marcin. Linde, Jesper. IMF Working Papers; Working Paper ; No. 2021/292 Full text available on IMF http://elibrary.imf.org/view/journals/001/2021/292/001.2021.issue-292-en.xml IMF e-Library