vitas vasiliauskas : statement on behalf of the nordic - baltic constituency at the imf statement by mr vitas vasiliauskas, governor of the bank of lithuania, on behalf of the nordicbaltic constituency at the annual meetings of the international monetary fund, washington dc, 13 october 2017. * * * i am honored to make this statement on behalf of the nordic - baltic imf constituency, consisting of denmark, estonia, finland, iceland, latvia, norway, sweden, and lithuania. in order to maintain strong growth, it is crucial to commit to structural reforms, apply well - designed macroprudential policies and strengthen multilateral cooperation. global economic growth has gained momentum ; however, we face challenges in reaching a sustainably high economic growth. in order to maintain this momentum, we need to address low productivity growth, inequality in terms of opportunities, as well as income and gender, rising indebtedness, and demographic headwinds. such challenges require policy makers to think in the frame of an appropriate mix of structural reforms, fiscal policy, well - designed macroprudential policies, and monetary policy. it is important to stay focused and committed to the implementation of structural reforms ; otherwise structural issues will continue to dampen growth prospects. technological change and fast - paced digitalization are altering economic fundamentals. policy makers will have to foster the positive implications of this change, while at the same time searching for solutions that help mitigate the negative effects. fiscal policy, often together with structural policies, will have to accommodate systemic changes, for labor markets in particular. technological improvements – despite the many benefits – have the potential to disrupt labor markets and change the sectoral composition of economies. in order to address such challenges we need to facilitate mobility and the efficient transfer of labor resources between sectors and regions. it is widely acknowledged that the prolonged low interest rate environment – partly a legacy of the global financial crisis – has created risks to financial stability. well - designed macroprudential policies – when needed also with the collaboration between countries – may prevent the build - up of financial vulnerabilities and imbalances, while at the same time enhancing the resilience of economic growth. therefore, we welcome the fund ’ s contribution to the global development of macroprudential policies and invite further research on their effectiveness and impact. in this respect we encourage the fund to continue gathering information on the best practices from the in - depth analyses and cross - country comparisons

balanced approach to policy rest on a number of merits. among these, it is worth noting the potential to exploit the synergies of multiple policies acting simultaneously. 3 in addition, reliance on a multi - pronged strategy reduces the likelihood of an over - burden of policy instruments when these are used in isolation, 4 while the possibly adverse effects on the overall performance of the economy arising from the implementation of some policies may be compensated by action in other fronts. see gaspar, vitor, maurice obstfeld and ratna sahay ( 2016 ) : “ macroeconomic management when policy space is constrained : a comprehensive, consistent, and coordinated approach to economic policy ”, imf staff discussion note no. 16 / 09, september. see davig, troy and refet s. gurkaynak ( 2015 ) : “ is optimal monetary policy always optimal? ”, federal reserve bank of kansas city research working paper no. 15 - 05, july. seen from the perspective of monetary policy, which are the key areas for coordination that deserve to be underlined? a first one is exchange rate policy. in theory, flexible rate regimes allow countries the implementation of a fully autonomous monetary policy. in addition, they are widely regarded as an efficient mechanism for the adjustment of the economy to external shocks. nonetheless, as volatile flows of capital across borders have led to acute swings in exchange rates, doubts have emerged as to the degree to which such frameworks isolate economies from developments abroad. in particular, sharp fluctuations of the exchange rate can have significant effects on the real economy, domestic prices and the financial sector, especially in emes. of course, this does not imply that floating rates should be discarded in favor of alternative regimes. instead, the issue is how to increase the efficiency of floating exchange rates during episodes of disruptive volatility. a frequently noted option is the temporary use of complementary intervention mechanisms to support the adequate functioning of currency markets. 5 fiscal policy is a second crucial area of coordination for monetary policy. the erosion of space following the global financial crisis, in combination with the end of the commodities boom that preceded it, has to a large extent constrained the role of fiscal policy in many emerging market economies. in light of the extant evidence, both theoretical and empirical, suggesting the pernicious effects that weak fiscal positions can have on the overall performance of the economy, for instance through an adverse impact on see blanchard, olivier, giovanni dell'ariccia and paolo mauro ( 2013