Format:
1 Online-Ressource (circa 61 Seiten)
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Illustrationen
ISBN:
9781616356538
Series Statement:
Working paper / International Monetary Fund WP/21, 292
Content:
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
Additional Edition:
Erscheint auch als Druck-Ausgabe Adrian, Tobias A Quantitative Microfounded Model for the Integrated Policy Framework Washington, D.C. : International Monetary Fund, 2021 ISBN 9781616356538
Language:
English
Keywords:
Graue Literatur
DOI:
10.5089/9781616356538.001
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