TREASURY'S BAKER SAYS SYSTEM NEEDS STABILITY
  Treasury Secretary James Baker said
  the floating exchange rate system has not been as effective as
  had been hoped in promoting stability and preventing imbalances
  from emerging in the global economy.
      In remarks before the afternoon session of the
  International Monetary Fund's Interim Committee, Baker said he
  was not suggesting that the system should be abandoned.
      "But I do suggest," he said, "that we need something to give
  it more stability and to keep it headed in the right direction
  when the wind shifts."
      He said that indicators can serve "as a kind of compass" but
  added that structural indicators can help focus attention on
  some policies.
      Baker, however, said the IMF "needs to move beyond
  macroeconomic indicators and find structural indicators that
  can help focus attention on some of the policies of specific
  relevance to the imbalances we face today."
      The Treasury Secretary said that indicators should be given
  a more prominent role in the annual economic reviews -- Article
  IV consultations -- that the Fund performs.
      Baker also told the policy making group that it was time
  for the IMF to adopt earlier recommendations making IMF
  surveillance more relevant to national policymakers and the
  public.
      "In particular, we urge increased publicity for IMF
  appraisals developed in Article IV consultations, the use of
  follow-up reports on country actions to implement IMF
  recommendations, and greater use of special consultation
  procedures," he said.
      Baker emphasized that indicators were a device "for moving
  beyond rhetoric to action."
      He said they provide "more structure to the system, and
  induce more discipline and peer pressure into the process of
  policy coordination."
      He said the Fund's procedures for surveillance need to be
  reviewed and updated to reflect the use of indicators.
      "This should be matter of priority for the executive board,"
  he said.
      Baker also urged the Fund to develop alternative
  medium-term economic scenarios for countries that "can help us
  focus even more clearly on the most important imbalances, by
  identifying options for addressing them and analyzing the
  implications of these options."
      He said also that further work should be done on finding
  paths that lead toward possible medium-term objectives.
      "If we are to take effective remedial action when there are
  significant deviations from an intended course, then we must
  have more definitive ways of indentifying the right course for
  key variables," he said.
  

