become smaller and more open, and serve as less of an anchor for economic policies. this requires us to rethink how we assess the prospects for national economies and policies. we need a top - down and bottom - up approach to build up the macro scenario and address the policy challenges. for instance, in an integrated world with high savings, monetary and fiscal policies might have to be different than in a world with low savings. a third remark, and lesson from the crisis, is that external imbalances are often a reflection, and even a prediction, of internal imbalances. therefore economic policies conducted in our member states, whether advanced or emerging, should not ignore external imbalances and just assume that they will sort themselves out. my fourth and final observation is that economic policies should be based on an appropriate institutional framework, aimed at ensuring medium - term stability. some kind of disciplinary regime should ensure that short - term objectives do not overshadow or supplant long - term priorities. it is not easy to see how these thoughts can be incorporated into an institutional framework. however, i consider that the multilateral consultation on global imbalances launched by the imf two years ago was a good starting point. it is a pity that it had little follow - up. that framework had the advantage of bringing together some of the key players to examine the imbalances which were emerging at global level and were mirroring internal imbalances. had the policy recommendations which were made at that time been followed more seriously, the current crisis would probably have had less of an impact. to be sure, if the us had adopted measures to improve net savings, in particular by households, as suggested, the housing bubble would have been more limited and its bursting less dramatic. had the euro area further improved the functioning of its markets, the impact of the slowdown would have been more contained. if china had focused more on its domestic market rather than basing its growth on exports, in particular through a policy of competitive exchange rate policy, its economy would have been less vulnerable to external shocks. all these policies might not have been sufficient, by themselves, to ward off the crisis, but they certainly would have made our economies more resilient. any revitalisation of the multilateral consultation process needs to address issues related to financial markets and trade as well, as implied by the recent g20 summit in washington. highly developed, well - functioning and regulated financial sectors are crucial for all

one aspect of pragmatism is the need to be bold and timely in introducing new policy tools, even unconventional ones when it becomes necessary. when a new crisis occurs, it is likely that the factors causing it are unprecedented. it goes without saying, that the solutions required to remedy the problem requires new measures as well. using conventional and ‘ consensus thinking ’ are unlikely to be an effective remedy. policy - making is also increasingly characterised by shorter time horizon. with the rapid developments in the financial markets, the window of opportunity and effectiveness for policy has shrunk considerably. gone are the days when policy - making can take months to formulate and implement, let alone years. as financial markets evolve, the shelf - lives of policies have also become shorter as policies can become ineffective very quickly. such an uncertain environment necessitates the deployment of new and untested policies. the “ audacity of pessimism ” – as mervyn king calls it – a situation when policymakers start scrambling to address problems only when things have gone terribly wrong – may prove too little too late to salvage the situation. constant, holistic and courageous assessments of implemented policies are therefore crucial in ensuring that policies remain relevant. another area of policy pragmatism that seldom gets discussed is the ability and conviction in reversing policies when deemed appropriate. in my years as a central banker, there seems to be an unspoken rule among global policymakers that certain policy paths are one - way, no - return endeavours. any policy reversals are seen as a backward move that is time inconsistent, which could risk a permanent damage on trust, reputations and credibility of the central bank. for me, this mindset is not tenable and counterproductive. it is imperative to realise that under extreme circumstances, a reversal of policies may be beneficial and in fact, necessary for the greater good and wellbeing of the society. sometimes, taking a step backward may be the best way forward. a case in point is in the area of liberalisation. while we have benefitted from an open market, and are strongly committed to the principles of this approach, we believe that countries should be cautious in its adoption, giving due consideration to the various trade - offs and preconditions. there might be a situation where a ‘ short moratorium ’ for further liberalisation becomes necessary. as with everything else, a balanced approach is always the preferred and wiser option. liberalisation is not a ‘