and in which problems can be resolved. the imf could be that forum. but it needs to become more legitimate, that is, more representative of an international economic community where all members share responsibility for promoting the common good of international financial stability. the imf needs to operate with clear objectives ; effective, market - based tools to achieve these objectives ; and a governance framework that supports sound decision - making and accountability. the need for change is pressing. as the risks associated with global imbalances grow in importance, the imf will be tested. i very much hope that a significantly more effective institution will emerge from the strategic review currently under way. if we can get it right, a more effective imf will be central to maximizing the benefits of globalization. indeed, the renewal of the international monetary fund is tremendously important, not just for americans and canadians, but for all nations in this increasingly interdependent world.

targeting is that monetary policy works best when it is well understood. the explicit inflation target is the centrepiece of our communications on monetary policy - it helps to anchor inflation expectations, and it makes it easier for us to explain our actions, and for people to judge our performance. it provides a strong incentive for us to meet the objective and to be accountable. taken together, these are the characteristics of effective, modern central banking. but i think that one can go further and say that these characteristics are useful principles that apply to the broader realm of public policy making. let me now turn to the topic of imf renewal, and talk about how these same principles can be applied to the task at hand. principle - based renewal at the imf the place to start is clear objectives and effective tools for achieving those objectives. the imf's first article of agreement states that it should " promote international monetary co - operation through a permanent institution which provides the machinery for consultation and collaboration on international monetary problems. " in the globalized, market economy of the 21st century, what this really means is the promotion of global financial stability by supporting a market - based international monetary order. i hope that there's a broad consensus that this should be the objective of the imf. i view the challenge facing the fund as being how best to fulfill this objective. the main tool is surveillance. but surveillance needs to be more effective. this means two things. first, surveillance should be more multilateral, putting greater emphasis on the linkages between members, the spillover of one country's policy choices on other countries, and the joint risks that this implies. the reality is that in an increasingly globalized economy, our understanding of these linkages and spillovers is not as good as it should be. the fund staff is an enormously talented group of men and women. we have to ensure that they undertake the research and analysis needed to understand the changing nature of global linkages. but understanding these linkages is not enough. we need a forum where risks are debated openly, frankly, and comprehensively by national policy - makers. in turn, this implies less emphasis on bilateral communication between the imf and a given country and more multilateral discussions among countries, supported by the imf. making surveillance more effective also means strengthening the analysis of the linkages between the financial sector and the real economy. in recent years, the fund has devoted considerable energy to developing sound standards and codes for assessing the financial infrastructure