TREASURY'S BAKER SAYS SYSTEM NEEDS STABILITY Treasury Secretary James Baker said the floating exchange rate system has not been as effective as had been hoped in promoting stability and preventing imbalances from emerging in the global economy. In remarks before the afternoon session of the International Monetary Fund's Interim Committee, Baker said he was not suggesting that the system should be abandoned. "But I do suggest," he said, "that we need something to give it more stability and to keep it headed in the right direction when the wind shifts." He said that indicators can serve "as a kind of compass" but added that structural indicators can help focus attention on some policies. Baker, however, said the IMF "needs to move beyond macroeconomic indicators and find structural indicators that can help focus attention on some of the policies of specific relevance to the imbalances we face today." The Treasury Secretary said that indicators should be given a more prominent role in the annual economic reviews -- Article IV consultations -- that the Fund performs. Baker also told the policy making group that it was time for the IMF to adopt earlier recommendations making IMF surveillance more relevant to national policymakers and the public. "In particular, we urge increased publicity for IMF appraisals developed in Article IV consultations, the use of follow-up reports on country actions to implement IMF recommendations, and greater use of special consultation procedures," he said. Baker emphasized that indicators were a device "for moving beyond rhetoric to action." He said they provide "more structure to the system, and induce more discipline and peer pressure into the process of policy coordination." He said the Fund's procedures for surveillance need to be reviewed and updated to reflect the use of indicators. "This should be matter of priority for the executive board," he said. Baker also urged the Fund to develop alternative medium-term economic scenarios for countries that "can help us focus even more clearly on the most important imbalances, by identifying options for addressing them and analyzing the implications of these options." He said also that further work should be done on finding paths that lead toward possible medium-term objectives. "If we are to take effective remedial action when there are significant deviations from an intended course, then we must have more definitive ways of indentifying the right course for key variables," he said.