WASHINGTON - The International Monetary Fund (IMF) on Monday called for greater policy cooperation in view of the rising financial integration of emerging market economies into the global market.

In the analytical chapters of its flagship Global Financial Stability Report, the IMF said that changes in emerging market asset prices explain over a third of the rise and fall in global equity prices and exchange rates.

According to the report, the impact of growth surprises from China on global equity prices has increased significantly over the past five years, but changes in Chinese asset prices tend to have little impact on asset prices elsewhere.

"Purely financial spillovers from China are still very small, but likely to grow considerably as China gradually continues to integrate into the global financial system," said Gaston Gelos, head of the Global Financial Stability Analysis Division at the IMF.

The report?said that the financial integration has promoted more efficient asset prices and resource allocation, but amplified shocks and transmission of excess financial volatility. The significant growth in global capital flows brought by mutual fund investments is also affecting the nature and size of financial spillovers from emerging market economies, said the IMF.

The IMF suggested that policymakers should enhance policy cooperation and surveillance in order to safeguard financial stability.

"The evidence underscores the need for policymakers to take into account economic and policy developments in emerging market economies when assessing their own countries' prospects," said Gelos.

The report also said that the contribution of the life insurance companies to systemic risks has increased in recent years, and called on regulators to take a more macro-prudential approach to the insurance sector.