in future, therefore, the private sector must be integrated better and earlier into crisis management and bear full responsibility for its actions. imf programs up to now, regrettably, have not always produced convincing results. not in all cases did the fund ’ s conditionality address the underlying causes sufficiently. in particular, its financial support was not sufficiently effective whenever the country concerned did not clearly subscribe to radical corrective measures. ultimately, it is the countries themselves, which are responsible for the success of their programs. shortcomings in their own efforts cannot be offset by providing international liquidity. iii the free movement of capital is a key element in the efficient allocation of resources and therefore a precondition for increasing prosperity worldwide. for this reason, it continues to be appropriate to give the imf a mandate for the liberalization of capital movements. experience in many industrial countries and emerging markets clearly shows, however, that liberalization must be accompanied by the establishment of stable financial markets and efficient prudential structures. the world bank and the imf can and must play a major role in that respect. capital controls, however, are normally not an effective instrument of monetary policy. iv i am concerned that the present difficulties might trigger pressure for protectionism, not only in crisis regions but also in other countries. to give in to these pressures would be highly detrimental to the prospects for a worldwide recovery. therefore, it is crucial to keep markets open, even if competition intensifies. similarly, it is also crucial to avoid a renewed round of competitive depreciation. in the long run, nobody would benefit, but everyone would suffer. the exchange rate policy has to be credible and in line with the development of the fundamentals. v on january 1, 1999, for eleven countries of the european union, the single european currency will become a reality. this will create a currency area with a population of almost 300 million. the euro, the future european currency, will start on an - all in all - positive economic basis, notwithstanding that unemployment is still too high. the commitment of the eu countries to a stability - oriented fiscal policy and continuing structural reform is a key to the longterm success of the european monetary union and also for continued improvement of prospects for growth and employment. also, the incoming euro must inherit the stability of the d - mark. for this purpose, it is important that the european central bank is committed to the primary objective of price stability and enjoys genuine independence, secured under

the effective pursuit of our goal. i remain unpersuaded that explicit numerical inflation targets are a key characteristic that distinguishes behavior among the world's central banks. despite the various public characterizations of the form of monetary policy regime, the federal reserve and most other central banks generally pursue price stability and, consistent with that goal, ease when economic conditions soften and tighten when they firm. that said, i am certain this will remain a topic of lively discussion here and at other monetary forums in years to come. participants on all sides of that debate will be well served by keeping open minds and remaining attentive to the evidence as events unfold and practices evolve. debates on the relative merits of asset price targeting also will continue and possibly intensify in the years ahead. the configuration of asset prices is already an integral part of our evaluation of the large array of forces that influence financial stability and economic growth. but given our current state of knowledge, i find it difficult to envision central banks successfully targeting asset prices any time soon. however, i certainly do not rule out that future work could improve our understanding of asset price behavior, and with it, the conduct of monetary policy. * * * i will miss debates on such topics with members of the federal open market committee and with the staffs of the board and the banks. the federal reserve is a remarkable institution. aside from its technical expertise in supervision and regulation and in overseeing an increasingly complex payments system, it combines for monetary policy an academic sophistication and a market - sensitive understanding that is brought to bear in formulating the tie between instruments and the goals of monetary policy. surely difficult challenges lie ahead for the fed, some undoubtedly of our own making, and others that will be thrust on us by market or other forces. having been exposed to the inner workings of this extraordinary institution for nearly two decades, i have little doubt that my successors, and theirs, will continue to sustain the leadership of the american financial system in an ever - widening global economy.