IMF managing director Christine Lagarde has called on on the world's central banks to co-operate more closely to help deal with the challenges presented by the world's financial systems.

Ms Lagarde was speaking at the opening of the first annual ECB Forum conference.

She said although there were vocal sceptics of the move, there were also “ardent supporters”, and she called for an open mind on the possibility.

“If policies are viewed only from a national perspective, we may end up in a world of ad hoc intervention, less rebalancing, and the potential to export financial instability,” she said. “ This would be a world of possibly large welfare losses in many countries, with not just spillover effects-from advanced to emerging market economies, but also ‘spillbacks’-feedback effects from emerging market to large advanced economies. Is this the kind of world we want to live in? I would hope not.”

She said the recent crisis had shown that potential gains from cooperation could be huge in times of distress.

“Cooperation essentially reduced the risk of tail events with large international feedback effects,” she said, citing the coordinated cut in policy interest rates in key countries at the height of the crisis, and the swap arrangements that the Fed instituted with other major central banks.

“These actions helped preempt financial market dislocation across the globe,” she said. “We need a concerted effort to examine the effectiveness of cooperative policy responses, their spillover effects, and their global welfare implications-also in light of the evolution of the financial system.”

(Additional reporting: Reuters)