More international co-operation needed to sustain world recovery
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Coordinated macroeconomic policies should address global imbalances, income convergence between developed and developing countries, and greater environmental sustainability, he added.
Another area requests collaborative and consistent approach at international level is in the financial sector, which was at the heart of the recent crisis. Strengthening financial regulation, supervision, and resilience remains a critical but as yet incomplete task.
The crisis, which spread quickly from Wall Street to the whole world, has demonstrated the urgent need to introduce international regulatory oversight of a globalized financial system, which would create less volatile financial flows for innovation, risk taking and investing in employment, production and development.
Economists believe that reforms to reshape regulatory systems have to be geared towards enhanced international frameworks for macro-prudential regulation, increased oversight of systemically important financial institutions, markets and instruments, new principles of executive remuneration, enhanced international tax cooperation and more effective oversight of the activities of credit rating agencies.
One example is the better regulation of over-the-counter (OTC) derivatives, which were blamed to have triggered the crisis. As governments are trying to tackle the loophole of "regulation vacuum," the IMF called for closer cross-border coordination of regulatory and supervisory frameworks of OTC derivatives markets to avoid regulatory arbitrage and mitigate systemic risk and adverse spillovers across countries.
Another example demonstrating the need for coordination is the ongoing discussion about taxation on financial sector. Currently the United States and some European countries are considering fees and charges on certain financial transactions and trades, while some countries remained hesitant.
"Coordination doesn't mean that the same kind of policy has to be implemented everywhere," as Strauss-Kahn pointed out, "But when something is done, we have to look at not only the effect in one country, but also the kind of consequences it may have on the rest of the world to avoid any kind of a regulatory arbitrage or something like that."
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