The second point with respect to policies appropriate for avoiding future imbalances relates to structural policies that are essential to promote productivity growth and to enhance the flexibility and competitiveness of the economies in question. In many cases, the restoration of competitiveness does not depend only on correcting relative costs and prices.
It provides an equilibrating mechanism for demand and supply of shortterm funds and in the process provides an avenue for central bank intervention in influencing both the quantum and cost of liquidity in the financial system, consistent with the overall stance of monetary policy.