classes of monetary strategies could be distinguished. two of these, viz., monetary targeting and exchange rate targeting strategies, use a monetary aggregate and the exchange rate respectively as an explicit intermediate target. the third, viz., multiple indicator approach, does not have an explicit intermediate target but is based on a wide range of monetary and financial indicators. the fourth, viz., inflation targeting, also does not have an intermediate target, but is characterized by an explicit final policy goal in terms of the rate of inflation. in the 1970s when monetary policy came into prominence, many countries adopted either money supply or exchange rate as intermediate targets. during the late 1980s, these paradigms started to change following globalization, technological advancements and large movement of capital across national boundaries. in view of difficulties in conducting monetary policy with explicit intermediate targets, of late, some countries are switching to direct inflation targeting, which works by explicitly announcing to the public the goals for monetary policy and the underlying framework for its implementation. in this framework, the monetary authorities have the freedom to deploy the instruments of monetary policy to the best of their capacities, but are limited in their discretion of policy goals. the framework is advocated on the ground that it clearly spells out the extent of central bank accountability and transparency. in reality, monetary policy strategy of a central bank depends on a number of factors that are unique to the country and the context. given the policy objective, any good strategy depends on the macroeconomic and the institutional structure of the economy. an important factor in this context is the degree of openness of the economy. the more open an economy is, the more the external sector plays a dominant role in monetary management. the second factor that plays a major role is the stage of development of markets and institutions : with technological development as an essential ingredient. in a developed economy, the markets are integrated and policy actions are quickly transmitted from one sector to another. in such a situation, perhaps it is possible for the central bank to signal its intention with one single instrument. operating procedures operating procedures refer to the choice of the operational target, the nature, extent and the frequency of different money market operations, the use and width of a corridor for market interest rates and the manner of signaling policy intentions. the choice of the operating target is crucial as this variable is at the beginning of the monetary transmission process. the operating target of a central bank could be bank reserves, base money or a benchmark interest rate. while actions of a central bank could influence all

however, divisions could arise on what exactly these standards and practices should be ; whether they are driven by the specific conditions prevailing in the worst hit financial systems and, therefore, inappropriate and burdensome for the relatively healthy ones ; and, the knowledge and human capital requirements to implement them effectively across a diverse set of countries. i have tried to provide some examples of potential dividing lines, drawing on my experience and observations of the process in the finance track. let me conclude this segment of the presentation by reiterating the point on which it began. this is an extremely differentiated and heterogeneous set of countries, whose conditions and priorities differ both in the short term and over the long run. it would be extremely naive to expect that such a group would be able to reach agreement on anything beyond the immediate crisis at hand, despite their ambition to tackle structural issues. from this perspective, any consensus on any issue is an achievement. it reflects the recognition that, notwithstanding differences between countries, global integration is a process that can be chaotic and disruptive if not handled in a collective and coordinated way. what is true for crisis management is also valid for the range of structural issues that the g20, as well as those which other multilateral processes are dealing with. an emerging market economy / indian perspective against this backdrop, let me now attempt to articulate what i would call an “ emerging market economy ” perspective, but which also reflects my characterization of the indian perspective. an important premise in this perspective is the point i concluded the last segment with. the process of globalization has enormous potential benefits for emes in all its forms. but, it also brings with it significant risks, such as the vulnerability to shocks which emanate outside their sphere of control. the best way to optimize on the “ risk - return ” tradeoff from globalization is to adhere to a common set of standards and rules, which, as i said earlier, forces the process to be driven by fundamental factors rather than by regulatory arbitrage, broadly speaking. on the basis of this argument, emes will see a clear benefit from engaging in any process that can develop and enforce such common standards and practices. the g20 is one such process, with the distinct advantage that, being a relatively small group, reaching consensus where it can be found is not too difficult a task. however, emes have significant domestic objectives and challenges and these must take priority in their policy decisions. many are dealing with the critical challenge of providing