Like many other organisations facing major change in its core business, the Fund will need to be sure that everything it values and rewards is tuned to support its new priorities. Conclusion Over the past fifteen years, the Great Inflation that followed the end of the Bretton Woods system has been replaced by the Great Stability. Globalisation has brought great benefits, but it is creating major challenges for policy makers. How will such issues be handled in future? The Fund certainly has the potential to act as an authoritative medium for international monetary collaboration, providing its surveillance activities are re-focused on external stability and the big global issues. The Managing Director’s current reform agenda is on the right lines. But the Fund’s effectiveness in promoting international monetary stability will depend critically on the organisation’s stature as a trusted and respected source of dispassionate analysis and impartial advice. And it will rest above all on the willingness of its members – large as well as small - to use it as their instrument to improve the quality of their own policy making. BIS Review 103/2006  7  Equipping the Fund with its own version of Hawk-Eye will not be enough. In the end it will be down to them – or more accurately, us.
See, for instance, Brunnermeier and Sannikov (2013). BIS central bankers’ speeches  3  I think that the division into these three main views provides a good reflection of the current debate. But there are of course no sharp dividing lines between them, rather the dividing lines are relatively fluid. And where one finds oneself on the scale ultimately depends on which argument or arguments one allocates the greatest significance. It will probably come as no surprise to those of you who follow the monetary policy debate in Sweden that I myself have great sympathy for the principle that monetary policy needs to support macroprudential policy. I would therefore place myself fairly close to the second view in Smets’ description. So what has led me to this view? Allow me to begin by giving my interpretation of what a monetary policy that leans against the wind entails. What does it mean that monetary policy leans against the wind? There are different ways of illustrating how and why financial imbalances and risks should be included in the monetary policy deliberations. Essentially it is a question of avoiding scenarios where the imbalances will lead to very negative effects on GDP, unemployment and inflation. So in principle it is a question, as usual in monetary policy, of stabilising inflation and the real economy.