the recent period of economic success, known as the “ great stability ”. but domestic stability is not sufficient to eliminate spillover effects. the impact of national macroeconomic policy decisions is transmitted to other countries through important prices in the world economy : real exchange rates ; real interest rates, and prices of important commodities like oil. changes in spending by us households affect export demand in the rest of the world, both directly and indirectly through movements in the dollar. changes in saving by governments in asia affect spending in the rest of the world through movements in real interest rates. changes in the supply of oil from the middle east affect incomes and spending elsewhere through movements in oil prices. moreover, not everyone has a floating exchange rate and an inflation target, and countries that try to prevent adjustment of their real exchange rates have exacerbated the problem of spillover effects. businesses in every country are conscious of how quickly their plans can be disrupted by unpredictable swings in exchange rates, asset prices and commodity prices. when those spillovers are sufficiently large and widespread, countries will want to engage with each other in a multilateral setting to discuss how they should be resolved. ( b ) what commitments are needed? before the collapse of the bretton woods system, the specific commitments made by countries to each other were very clear : fixed exchange rates and capital controls. in the wake of the collapse of bretton woods, the members of the imf attempted to re - define their commitments. but the exercise of defining what practical commitments were needed focussed primarily on exchange rates and had rather little effect in practice. two broad commitments are particularly important. first, countries should make public commitments about their targets for macroeconomic policies – fiscal, monetary and financial. that still allows countries considerable discretion in their choice of policy framework – for example, whether to adopt a fixed or floating exchange rate. second, policy frameworks must be consistent across countries. policies which try to prevent changes in real exchange rates in response to changes in fundamentals, or lead to an unsustainable build - up of external debt, are properly the concern of the international community. ( c ) what tools are needed? the main tool to monitor those commitments is surveillance. the surveillance activities of the imf have been criticised because they pay insufficient attention to spillover effects and instead examine in unnecessary detail microeconomic issues. for example, the sharp rise in oil prices over the past two years has posed a risk to economic stability in many countries. but there is no reference

##nce and obscurity. we are at that point. if this generation fails, then the work of those who were “ present at the creation ” will have been undone. it is our duty to re - create the institutional framework that we inherited. it will not be easy. but in case like alice you are tempted to think that, “ there ’ s no use trying ; one can ’ t believe impossible things ”, remember the queen ’ s reply : “ why, sometimes i ’ ve believed as many as six impossible things before breakfast ”.