Moreover, not everyone has a floating exchange rate and an inflation target, and countries that try to prevent adjustment of their real exchange rates have exacerbated the problem of spillover effects. Businesses in every country are conscious of how quickly their plans can be disrupted by unpredictable swings in exchange rates, asset prices and commodity prices. When those spillovers are sufficiently large and widespread, countries will want to engage with each other in a multilateral setting to discuss how they should be resolved. (b)  What commitments are needed? Before the collapse of the Bretton Woods system, the specific commitments made by countries to each other were very clear: fixed exchange rates and capital controls. In the wake of the collapse of Bretton Woods, the members of the IMF attempted to re-define their commitments. But the exercise of defining what practical commitments were needed focussed primarily on exchange rates and had rather little effect in practice. Two broad commitments are particularly important. First, countries should make public commitments about their targets for macroeconomic policies – fiscal, monetary and financial. That still allows countries considerable discretion in their choice of policy framework – for example, whether to adopt a fixed or floating exchange rate. Second, policy frameworks must be consistent across countries. Policies which try to prevent changes in real exchange rates in response to changes in fundamentals, or lead to an unsustainable build-up of external debt, are properly the concern of the international community. (c)  What tools are needed?
Exchange rate volatility vis-à-vis the euro area has declined, while it would continue to exist vis-à-vis the US dollar even after integration. The as yet more flexible labour market ushered in by the transition period II of the Bilateral Agreements I is the flagship of Swiss economic policy. It keeps unemployment and the resultant national costs low in the long term and strengthens the incentives for individual performance. It is essential to translate openness and flexibility, also with respect to internal structural reforms and external relations, into autonomously implemented reforms and a practical global orientation. BIS Review 49/2004  1