IMF pushes to modernize surveillance

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The IMF is updating its methods for exchange rate analysis as part of a broader effort to improve its ability to meet the needs of its 184 member countries in today's globalized world. In an interview, Carlo Cottarelli, Deputy Director of the IMF's Policy Development and Review Department, explains the rationale behind these and other changes to the IMF's surveillance tool kit and sheds light on how they fit in with the IMF's overall reform agenda.

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The IMF updates its surveillance framework

The IMF is in the midst of implementing a detailed medium-term strategy (MTS) that will improve its ability to meet the needs of its 184 member countries in today's globalized world. As part of this initiative, the Fund is modernizing its surveillance-that is, its methods for monitoring economic developments and policies and for providing advice to member states. As part of its work to update its surveillance tool kit, the IMF has just released a series of papers, including one on exchange rate analysis. Carlo Cottarelli, Deputy Director of the IMF's Policy Development and Review Department, discusses the push to modernize the IMF's surveillance framework with Jeff Hayden of the IMF's External Relations Department.

IMF Survey: What is the motivation behind efforts to modernize surveillance?

cottarelli: We would like to move surveillance to a higher level-to the best practice level-taking into account the progress that best practice has made in the past 30 years.

There are many initiatives under way as part of the IMF's MTS [see box]. One important one is a review of what we call the foundation of surveillance: the 1977 IMF Executive Board decision on surveillance over exchange rate policies. Like many foundations, this one is pretty old, so the question is to what extent the decision needs to be revised and modernized.

The world was very different 30 years ago. Many countries now have floating exchange rate regimes, and there's been an enormous increase in capital movements. We think it's worth considering whether there's a case for a revision of the decision to reflect these changes. It's complex, and we need to do it carefully, but the payoff could be high.

IMF Survey: What else is the IMF doing to bolster its surveillance?

cottarelli: We are also discussing with our membership whether it would be helpful to draw up a list of operational goals-a so-called remit-that surveillance...