Abstract

I would like to welcome you all to our inauguration of the Camdessus Central Banking Lecture Series, which will become an annual event. It is a tremendous privilege to open this lecture in the presence of the person to whom this series is dedicated—former Managing Director Michel Camdessus.

I would like to welcome you all to our inauguration of the Camdessus Central Banking Lecture Series, which will become an annual event. It is a tremendous privilege to open this lecture in the presence of the person to whom this series is dedicated—former Managing Director Michel Camdessus.

It is also a momentous occasion to welcome here at the IMF the Chair of the U.S. Federal Reserve, the distinguished Janet Yellen.

And we have with us today many distinguished guests, to whom I also extend a warm welcome.

This lecture is at the heart of what we do. The Fund has a core mandate in overseeing the global financial system. Over the years, that mandate has evolved with changing global conditions—and it continues to evolve.

That is why we initiated this Lecture Series: first, to reflect on the recent crisis period—what we have learned—and second, to build stronger bridges among those preoccupied with central banking.

Reflecting on the recent crisis period

Let me start with why we need to reflect on the recent crisis period—and take stock of lessons learned.

The crisis was like an earthquake. It shook the financial system and swayed many of our assumptions and traditional policy prescriptions. It opened crevices, raised mountains, and diverted streams in the central banking and monetary policy landscape—formerly flat and bland, usually with relatively small blips of 25 basis point changes in interest rates up or down, spaced out at regular intervals!

On this new terrain, central bankers are quickly learning to be mountaineers, and have been busily developing new ideas and new tools for this more challenging terrain.

Central banking has suddenly become an exciting sport! So much so as to attract an avid global audience—although perhaps not as many as in Brazil at the moment.

Nonetheless, Janet, you may not be surprised to know that when you give your press conferences a group of passionate staff here at the IMF get together to watch you live on screen. I am told they even bring popcorn to the meetings! Such is the keen level of interest today—and certainly not just at the IMF.

“Monetary policy and central banking have come to the forefront of the policy landscape because of the role they have played in fighting this crisis and returning us to stability.”

Monetary policy and central banking have come to the forefront of the policy landscape because of the role they have played in fighting this crisis and returning us to stability. And because of the role they will continue to play. Let’s face it: we will not return to the precrisis world. The new normal will be different.

The Fund’s global membership of 188 countries recognizes this. Their questions on monetary policy and central banking are more frequent and increasingly complex. We need to provide answers—and offer directions on paths yet untrodden.

Building stronger bridges

This brings me to the second objective of this lecture series—the need to build stronger bridges between all those with a stake in the important issues of central banking.

We need to reexamine, refine, and modernize our policy advice on monetary policy and central banking. Yet this is a task that is too large for any single institution to undertake. We at the IMF recognize that much of the expertise and knowledge on these issues resides outside these walls—in the field, on the ground, in the board rooms of central banks.

Certainly, we can bring our cross-country perspective to bear, our experience in collaborative international efforts, and our expertise in looking at the big picture of economic policy.

At the same time, our goal is to join hands with central banks, academics, and policymakers—to think together, explore together, compare notes, and move forward together. To build stronger bridges with each other.

This Camdessus Lecture Series is intended to be a pillar on which these bridges will rest—by creating space for these avid “fans” of monetary policy, where they can engage and exchange views. A meeting that would bring us closer together year after year.

Thinking about the future of monetary policy

Before I leave you to the wisdom of our speakers, allow me to highlight three of the main questions that we hope to address along with you in the period ahead.

First, the crisis was a stark reminder that price stability is not always sufficient for greater economic stability. So, should central banks have a financial stability objective?

Second, with increasingly complex financial interconnections, many small open and emerging market economies have found it challenging to deal with large swings in capital flows, asset prices, and exchange rates. How can these economies retain monetary policy independence in such a policy setting? And what tools should they use?

Finally, the crisis has galvanized a broad effort to reform the global regulatory framework. There has been progress on various aspects of this financial reform agenda—but much still remains to be done. How will financial regulation and the new structure of the financial system affect the functioning of monetary policy, domestically and abroad?

Again, working with all our partners, the Fund’s goal is to develop clearer and more concrete policy views on these questions in the months ahead. We can start today.

Introducing Michel Camdessus

Now, before giving the floor to Chair Yellen, it is my profound pleasure to introduce the person to whom this Lecture Series is dedicated, and who has kindly agreed to be with us today at this inaugural event: Michel Camdessus.

His legacy is well known to all of us. Michel: you presided over the Fund for thirteen years—nearly a fifth of this institution’s history and as its longest serving Managing Director. Your stewardship was transformational for the institution—and not without its share of trials and tribulations.

Soon after you took the helm in 1987, the world as we knew it then was undone radically and unexpectedly. You managed the Fund through the fall of the Berlin Wall, the unraveling of the Soviet Union, the Mexican crisis, the Asian crisis, and the Russian crisis.

Yet, when you announced your intention to retire, a reporter asked you to name the most important qualities that your successor should have. You shot back without hesitation and from the heart: “a solid sense of humor!” You were indeed blessed with the “curse of living in interesting times.”

“The crisis has galvanized a broad effort to reform the global regulatory framework.”

Throughout these difficult and dynamic times, you steered the Fund with a remarkable sense of vision, with vigor and tenacity. Your interactions with country authorities were characterized by your unique skill in galvanizing different forces toward favorable outcomes. You were so invested in helping members of the Soviet bloc through their transition, for example, that you became a household name from Moscow, to Warsaw, to Bishkek—providing an element of continuity amid a continuous turnover of political and public figures.

Your untiring efforts also brought a more humane face to the Fund. Indeed, it was your compassion for the cries of the poor that took the Fund in its most important direction toward poverty reduction—through the establishment of concessional lending through the “enhanced” Structural Adjustment Facility and its successor the Poverty Reduction and Growth Facility (now the PRGT).

And your compassion extended well beyond the Fund. Your “7 Pledges on Sustainable Development” became part of the 15 principles of the UN Millennium Development Goals.

Michel, you were—and still are—a staunch supporter of multilateralism and cooperation, of openness and friendship between nations. Under your leadership, a decisive effort was made to curtail exchange restrictions, in accordance with Article VIII of the Fund’s Articles of Agreement. As a result, by the mid-1990s, making a public commitment to openness was no longer controversial in most countries.

And with openness came the need to better integrate. You witnessed the globalization of financial markets, and—as a central banker yourself—you had the foresight to recognize that Fund surveillance needed better integration of its work on monetary and exchange rate policies, and financial stability. You saw the Financial Stability Assessment Program (FSAP) evolve from a pilot to become a key activity and major output of the Fund. In fact, thanks to your efforts, the IMF was able to transform the moniker of “It’s Mostly Fiscal” into “It’s also Monetary and Financial”!

Finally, Michel, you and Brigitte always harbored a deep respect and genuine affection for the staff of this institution. You were deeply concerned for their welfare, and stood up for their cause.

Fund staff reciprocated with their trust, respect, and abiding affection for you, which—as is clear from the audience here today—remains powerful. The staff admire you personally and admire what you achieved for the institution and the membership. We thank you.

As a music lover, you referred to Fund staff as the Stradivarius of the world orchestra—and that with such good instruments, it was extremely easy to conduct an orchestra.

Well Michel, today you have another opportunity to engage with your Stradivarius orchestra. We cannot wait to be part of another one of your encores.