Mark Thoma reads Rodrigo Rato on "surveillance":
Economist's View: "Strengthening IMF Surveillance": The Managing Director of the International Monetary Fund, Rodrigo de Rato, discusses attempts to and strengthen IMF surveillance over the economic policies of member nations:
For many years, the IMF has engaged its member countries in a process known as "surveillance," in which it monitors, analyzes, and consults on each country's economic policies - both exchange rate policies and relevant domestic policies. These regular checkups help to identify potential vulnerabilities and maintain economic stability. However, the increasingly complex policy challenges of the globalized economy demand a fresh look at this process.
This June, the IMF's Executive Board did just that...
Paul Krugman likes to say that IMF surveillance is (a) tremendously valuable when it serves to strengthen the internal political hand of factions in a country committed to reality-based economic policy, but (b) tremendously harmful when it serves to strengthen the internal political hand of factions in a country committed to pointless deflationary austerity--and that it is hard for outsiders to figure out what effects they are really having.
I think surveillance has the additional important effect of keeping people in the IMF more-or-less current on what is going on, so that if a crisis does develop the staff has a better chance of giving their bosses good advice as to how to deal with it.