IMF sharply steps up its dealings with international capital markets and private sector Häusler pushes for better market insights

• Pages: 341-345

Page 341

In August, Gerd Häusler, a German national, joined the IMF staff as Counsellor and Director of the newly created International Capital Markets (ICM) Department. The IMF created this department to enhance its surveillance of international capital markets and to strengthen its work on crisis prevention and crisis management (see box, page 343).

Häusler brings a wealth of private and public sector experience, including as a member of the Directorate and the Central Bank Council of the Deutsche Bundesbank. More recently, he was a board member of Dresdner Bank as well as Chair of Dresdner Kleinwort Benson, its investment banking arm. He spoke recently with the IMF Survey about the state of the world's capital markets and his plans for the new department.

IMF SURVEY: Your early days as Director have been extremely eventful: financial crises in Argentina and Turkey, followed by the September 11 terrorist attacks.

What is the state of the world's capital markets? Have the declines in the equity markets this year been a necessary correction or a more worrying sign?

HÄUSLER: The markets in a technical sense have held up remarkably well, especially after September 11, if you bear in mind that some of the infrastructure in lower Manhattan was demolished. Those involved in "restructuring" did a great job. I especially want to congratulate the Federal Reserve in Washington and in New York and the manyPage 343 unsung heroes in the back offices of the private sector financial institutions.

As for the markets, we have seen a considerable drop in equity prices, but they have come down from a very high level. Perhaps the levels were assuming evaluations and price-earnings ratios for the next year or two that were overoptimistic-extrapolating developments from a long bull market. Considering that the outlook for the world economy is certainly much less optimistic than it was a year ago, equity markets have held up remarkably well. In fact, they may already be looking ahead toward the upturn that many of us expect to occur next year; rightly or wrongly, only time can tell.

IMF SURVEY: Should we be surprised by the resilience of the markets in the face of such uncertainty?

HÄUSLER: I don't know if surprise is the right word.We should feel reassured because this resilience shows that the markets have become very professional and have learned not to panic, even though present valuations are still high in a historical perspective.

IMF SURVEY: Did the existence of your new department enable the IMF to react...