Harnessing the Power of Transparency – Christine Lagarde, Managing Director, International Monetary Fund

Speech by Christine Lagarde, Managing Director, International Monetary Fund Atlantic Council, Washington, DC, February 8, 2017

February 8, 2017

Good morning.

Thank you for the kind introduction, Mona. And thank you to Fred Kempe, Andrea Montanino, and the Atlantic Council for giving me the opportunity to talk about the importance of transparency in the work we do at the International Monetary Fund.

As you know, the IMF’s job is to promote global economic and financial stability. This is a precious public good—because it allows the economic pie to grow and because it makes it easier to share the pieces more fairly among all citizens.

Our member countries create this public good of economic and financial stability—by disclosing data and policies in a transparent manner; by sharing this information with other governments and the public; and by working together—not only in times of crisis, but every single day.

Our members do all this—with our help—because they know that what happens in one economy, in one financial system, matters to many other economies in this hyper-connected world.

In other words, the IMF could not do its job without the power of transparency. We harness that power as we play our various roles:

  • We are the trusted adviser to governments who often share market-sensitive information with us.
  • We are the global watchdog who raises red flags and encourages information sharing and collaboration.
  • We are the fitness coach who provides hands-on technical assistance and training.
  • And we are the firefighter who provides financial assistance in times of need—so economies can get back on their feet and provide better prospects for their citizens.

Transparency allows us to wear all these different hats, for the benefit of our global membership.

For most of us, the benefits of transparency have been obvious in some ways. I think you would agree that much has been achieved over the past decades, but we have also tried to quantify the financial gains from greater transparency that countries could realize.

As Stanley Fischer, Vice-Chairman of the Fed and former First Deputy Managing Director of the IMF, once said: “ Nothing would help improve standards more than if countries that met higher standards were rewarded with lower borrowing costs ”. [1]

Voilà! New IMF staff research [2] shows that greater data transparency—promoted through the IMF data standard initiatives—leads to a 15 percent reduction in the spreads on emerging market sovereign bonds—three months after the improvements are made.

IMF staff research also shows that, during crises, capital flight is greater in the least transparent countries, which underlines the benefits for financial stability that transparency can bring. [3]

Of course, what is good for our 189 member countries is good for the IMF itself. Transparency allows us to contribute to the public debate; it allows the public to scrutinize our work; and it increases our accountability.

In pursuing this transparency, this also means engaging with the broadest possible audience. This includes parliamentarians, labor unions, business owners, students, policy experts, “non-experts”, and—of course—think tanks.

This is why am I am delighted to be here at the Atlantic Council.

I look forward to our discussion. Thank you.

[1] Fischer, Stanley. “Financial crises and reform of the international financial system.” Review of World Economics 139.1 (2003): 1-37.

[2] Sangyup Choi and Yuko Hashimoto. IMF Working Paper: “The Effects of Data Transparency Policy Reforms on Emerging Market Sovereign Bond Spreads”, (to be published: 2017).

[3] Gaston Gelos and Shang-Jin Wei. “Transparency and International Portfolio Holdings”. The Journal of Finance (December 2005).