not so sure. • new consensus : capital controls are not only appropriate, but also necessary. • but what type of controls and under what circumstances? • are they a substitute for or a complement to macroprudential policies? • price based or quantity based? bis central bankers ’ speeches • asymmetric as between controlling inflows or outflows? ( c ) pre - crisis : consensus that foreign exchange intervention is sub - optimal. • now we are not so sure with some aes defending their currencies from the safe haven impact. • new orthodoxy : there may be circumstances when foreign exchange intervention is warranted. • when is intervention appropriate? • is intervention symmetric between fighting currency appreciation and fighting currency depreciation? i believe the imf management has issued a guidance note to its staff on capital account issues. whether imf will be even handed, as between source and recipient countries, on capital flows will be an important issue for surveillance on the way forward. question 2 : how well do you think the imf is now handling linkages and spillovers in today ’ s interconnected world, above all the eurozone, but also in relation to global imbalances? response • the imf needs to put in greater effort at being even handed in both its policy advice and in working towards its acceptance. this has to be done both at country and global levels. • let me cite two examples to illustrate this. currency wars • near consensus that one of the root causes for the global financial crisis was the unsustainable build up of global imbalances. concern that currency wars, by preventing market based adjustment of exchange rates, may be aiding build up of global imbalances. • moscow g - 20 : “ we will refrain from competitive devaluation. we will not target our exchange rates for competitive purposes, will resist all forms of protectionism and keep our markets open ”. • useful to summarize the arguments of both sides on the currency wars. arguments of emerging markets ( ems ) ( i ) ( ii ) extraordinary surge in global liquidity because of quantitative easing by advanced economies. - this liquidity not absorbed in aes. spilling over into ems. - this is money looking for quick returns. hence inherently volatile. in the face of capital flows, we do not have any benign solution. - if we don ’ t intervene, appreciation of currencies unrelated to fundamentals. - if we intervene to stem appreciation, but do

”, it has been brought out that there is a perception among some country authorities that the imf is dominated by the interests of its largest shareholders. surveys have shown that about a third of country authorities and half of the mission chiefs did not believe that the imf has become more even handed since the onset of the global crisis. lack of even handedness can undermine the imf ’ s ability to perform both its global watchdog and trusted advisor roles. there is a need to strike an optimum balance between these two objectives which will give a boost to the imf ’ s credibility. • the issue of even handedness is inextricably woven into the imf ’ s governance structure. modernizing surveillance must flow from and cannot precede reforms in governance. as governance reforms progressively reflect the changing global economic realities, so also will the imf ’ s surveillance gain legitimacy, incisiveness and traction. it is only by this that the imf ’ s surveillance will remain meaningful and responsive to the rapidly evolving needs of an integrated global economy. bis central bankers ’ speeches