The International Monetary Fund has published a departmental paper introducing FPP-FIN, a framework that embeds banking sector dynamics in its accounting-based Financial Programming and Policies approach. Using banks’ aggregate balance sheets, income statements and financial soundness indicators, the framework links macroeconomic projections to profitability, asset quality, capitalization and lending capacity. It can also model two-way feedback in which deteriorating bank capital tightens credit conditions and amplifies an economic downturn. FPP-FIN supports two main applications. The first adds forward-looking banking sector indicators to standard macroeconomic projections, while the second introduces explicit links between credit conditions and consumption, investment and growth. A central measure is the gap between banks’ actual and target capital ratios, which determines whether they can meet credit demand or may need to restrict lending. The framework was piloted in the 2024 Kazakhstan Article IV Consultation and adapted through technical assistance for the Bahamas, Costa Rica, Oman and the United Arab Emirates. The paper presents FPP-FIN as a streamlined, adaptable tool rather than a unified macrofinancial model. Potential extensions include property prices, foreign currency debt, exchange rate effects, more granular credit data and integration into semi-structural and dynamic stochastic general equilibrium models.
2026-09-04International Monetary Fund
International Monetary Fund introduces FPP-FIN framework to integrate banking dynamics into macroeconomic analysis
The International Monetary Fund has introduced FPP-FIN, a framework that integrates banking sector profitability, asset quality, capital and lending capacity into macroeconomic analysis. It supports both financial stability projections and two-way modeling of how credit conditions can amplify economic shocks. The approach has been applied in surveillance and technical assistance across several countries.