The macroeconomic effects of the global crisis in financial Markets will be serious and no region will escape entirely unscathed, the chief of the International Monetary Fund (IMF) said on Wednesday
IMF Managing Director Dominique Strauss-Kahn, who is on a three-day visit to India, said in a speech authorities should respond to any downturn through a mix of fiscal and monetary policy to sustain domestic demand.
Strauss-Kahn said the world Economy had entered a difficult phase with the financial crisis spreading to the real Economy.
"I believe that the effects will be felt increasingly in Europe and I do not think the emerging economies are immune from the crisis," he told a meeting organised by a leading Indian economic think-tank.
"This has become a global problem that requires a global solution. Emerging Markets need to join industrial countries in the macroeconomic and regulatory policy responses. Such a collaborative approach offers the best hope for ensuring the stability of the global Economy."
The IMF chief said central banks would need to continue to provide liquidity to ensure the smooth functioning of interbank money Markets and advised regulatory authorities to make sure they have the capacity to react rapidly to changes.
Strauss-Kahn called on emerging nations to contribute to ensuring global economic stability.
"There is also a broader role that some emerging economies can play to help support global growth -- through policies to strengthen their domestic demand as a growth engine, including greater exchange rate flexibility."
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