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~ Compliance Contents~
Commitment: "The challenge is to promote financial stability through national action as well as through enhanced international cooperation…(I)t requires that all countrsume their responsibility for global stability by pursuing sound macroeconomic and sustainable exchange rate policies….(I)t requires the adoption and implementation of internationally-agreed standards and rules…(I)t also requires the right structure of incentives for all participants in the in the international financial system"
Canada: Score +1
As the elected chair of the G20, Canada has acted as a leader in the promotion of exchange rate management. Although agreed upon by the G8 that exchange rate policy is the responsibility of the sovereign states, Canada has pushed for voluntary evaluations of each country's financial rules by the IMF and World Bank to identify financial vulnerabilities and to find ways to address them. To get the ball rolling, Canada was among the first to have its own evaluated. Canada also invoked increases in the interest rate to resist inflationary pressures at home.
France: Score -1
Germany: Score -1
Italy: Score -1
With the continued decline of the Euro pretty much since inception, the focus on exchange rate management for these participants has been mainly on stabilizing and strengthening its position in the world market. Despite the theoretical capability of it being a catalyst for a rapid economical transformation, the Euro has not yet proven to be the strong. Despite each country's attempts to become more competitive, with the intention that increased competition will bolster the Euro, it is too early for the benefits of this to be felt. The attempts of the European Bank has done little to stem the devaluation of the Euro and its inability to respond to such crises has shaken the confidence level in the new currency.
Japan: Score 0
Despite Japan's aggressive intentions and efforts to rebuild its economy and that of the countries surrounding it, the poor performance of its economy in the second half of 1999 proved that either the policies implemented were neither aggressive enough nor effective enough. Japan must continue its efforts to encourage and achieving sustained, domestic demand-led growth and implement structural and financial sector reforms. The real GDP in the fourth quarter of 1999 marked a –1.4% growth.
Russia: Score 0
Russia's movement to a floating exchange rate allowed the exchange rate of the rouble to properly reflect macroeconomic fundamentals, thereby helping to improve the overall balance of payments. The stabilization and subsequent improvement of the economic situation in Russia established by responsible policies of the Russian government and central bank has set the stage for a reform of its banking system, which is generally deemed as urgent. To secure the gains achieved in this period, the Russian government must continue on its path of tax reform and commitment to strengthening payment discipline.
United Kingdom: Score +1
Much of the focus in the United Kingdom has been on the appreciation of the pound sterling in comparison to the Euro, raising concerns that exports would decrease. However, these concerns were addressed in this year's budget by using the gains made in the economy over the last year to strengthen the fiscal tightening introduced in the 1999 budget. The government has re-stated its commitment to "stability and prudence and ensures the Government remains on track to meet the fiscal rules and deliver steady growth".
United States: Score +1
The United States has experienced a prolonged period of robust economic growth, against a background of extremely low unemployment, seeming non-existent inflation and a budget surplus. Concerns exist, however, about the country's capability to maintain this growth exist due to an over-inflated market and the negative rate of private sector and household savings. The move by the US Fed to tighten its monetary policy and raise interest rates falls in line with its policy of commitment to a strong dollar. The United States has also continued to encourage macroeconomic and structural policies supportive of sustained non-inflationary growth by its major trading partners, with Japan in particular.
Report compiled by: Colleen McShane
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