##sustainable. policy makers are responsible for planning both for the short and the longer term and we encourage governments to consolidate their fiscal positions in order to enhance their nations ’ competitiveness. the fund should continue to monitor closely structural deficiencies and advise accordingly. good governance economic integration has brought increased prosperity to those who have been part of the globalization process. increased globalization also implies intensified competition in most areas. good governance is, therefore, more important now than ever because it fosters confidence and growth, without entailing much additional economic cost. all empirical studies confirm that much can be gained by embracing good governance and it is an essential component of crisis prevention efforts. good governance is equally vital in both the public sector and the corporate world, and its merits are relevant in all countries. recently, corporate governance issues have been prominent on the world economic agenda as financial markets have been recovering from scandals that came to the fore following a period of excesses in equity markets. in order to increase confidence in the markets, it is imperative that the corporate world adhere to the principles of good governance. good governance in the public sector is also an essential tool for strengthening institutional capacity, which is fundamental for economic and social development. the fund has an important role to play in this field and we welcome the increased emphasis it has given to the issue of governance. transparency and international standards with the world economy having suffered a confidence crisis, it is important to continue to promote greater transparency and accountability. various studies have demonstrated that transparency and adherence to international standards lead to easier market access and lower borrowing costs. there is much to gain by applying these simple principles. it is also important to continue developing international standards and codes that enhance transparency and facilitate comparison between countries and regions. the fund has invested considerable efforts in promoting transparency and developing standards and codes in cooperation with the world bank, the bank for international settlements and other organizations. remarkable progress has been made in this area but we realize that broad implementation of these standards will take time, although this is time well spent as improved practices and comparability will increase the stability of the international financial system. we believe that the next steps should be to harmonize accounting standards at world level. the nordic - baltic constituency encourages all member countries to support the efforts of the international accounting standards board to reach a consensus on accounting standards and principles. furthermore, we welcome the new steps taken to increase the fund ’ s transparency, especially the policy of moving to presumptive publication of all article iv reports and the

mr. greenspan ’ s testimony on the international economic and financial system testimony of the chairman of the board of governors of the us federal reserve system, mr. alan greenspan, before the committee on banking and financial services of the us house of representatives on 16 / 9 / 98. as i testified before this committee in the midst of the mexican financial crisis in early 1995, major advances in technology have engendered a highly efficient and increasingly sophisticated international financial system. the system has fostered impressive growth in world trade and in standards of living for the vast majority of nations who have chosen to participate in it. but that same efficient financial system, as i also pointed out in that earlier testimony, has the capability to rapidly transmit the consequences of errors of judgment in private investments and public policies to all corners of the world at historically unprecedented speed. thus, problems that appeared first in thailand more than a year ago quickly spread to other east asian economies that are relatively new participants in the international financial system, and subsequently to russia and to some degree to eastern europe and latin america. even long - time participants in the international financial community, such as australia, new zealand, and canada, have experienced the peripheral gusts of the financial turmoil. japan, still trying to come to grips with the bursting of its equity and real estate bubbles of the late 1980s, has experienced further setbacks as its major asian customers have been forced to retrench. reciprocally, its banking system problems and weakened economy have exacerbated the difficulties of its asian neighbors. the relative stability of china and india, countries whose restrictions on international financial flows have insulated them to some extent from the current maelstrom, has led some to conclude that the relatively free flow of capital is detrimental to economic growth and standards of living. such conclusions, in my judgment, are decidedly mistaken. the most affected emerging east asian economies, despite the sharp contraction in their economic output during the past year, have retraced, on average, only one - sixth of their per capita growth over the past ten years. even currently, their average per capita incomes are more than 2½ times the levels of india and china despite the unquestioned gains both have made in recent years as they too have moved partially to join the international financial community. moreover, outside of asia, several east european countries have made significant progress towards the adoption and implementation of market systems and have increasingly integrated their financial systems into the broader world context to the evident benefit of their