Multilateral Surveillance

The IMF presents multilateral surveillance as one of its core responsibilities and has recently sought to enhance this role via a series of multilateral consultations with systemically important countries, designed to coordinate exchange rate and macroeconomic policy in order to reduce the global economic imbalances that threaten the stability of the international financial system. The authors examine the evolution of the IMF's multilateral surveillance and assess what it has achieved. They also investigate what may reasonably be expected from surveillance and, in the light of this analysis, evaluate the outcome of the multilateral consultations. Concluding that there are strict limits on what the Fund can achieve in terms of using multilateral surveillance to avoid economic and financial crises, they also explore areas relating to crisis management where the IMF might be able to make a more important contribution. The Fund needs to temper ambition with reality if it is to maintain credibility as an international financial institution.