Leaving the Nest: The Rise of Regional Financial Arrangements and the Future of Global Governance. Issue 1 (13th January 2019)

• Record Type: Journal Article
• Authors: Kring, William N.; Grimes, William W.
• Other Names: Kring William N. guestEditor.; Gallagher Kevin P. guestEditor.
• Is Part Of: Development and change. Volume 50:Issue 1(2019)
• Page Start: 72
• Page End: 95
• Publication Date: 2019-01-13
• Subjects: Social sciences -- Periodicals; Economic development -- Periodicals; Social change -- Periodicals; Developing countries -- Periodicals; 303.483
• DOI: 10.1111/dech.12471
• Languages: English
• ISSNs: 0012-155X

Abstract

ABSTRACT: This article examines the impact of regional financial arrangements (RFAs) on the global liquidity regime. It argues that the design of RFAs could potentially alter the global regime, whether by strengthening it and making it more coherent or by decentring the International Monetary Fund (IMF) and destabilizing it. To determine possible outcomes, this analysis deploys a 'middle‐up' approach that focuses on the institutional design of these RFAs. It first draws on the rational design of institutions framework to identify the internal characteristics of RFAs that are most relevant to their capabilities and capacities. It then applies these insights to the interactions of RFAs with the IMF, building on Aggarwal's (1998) concept of 'nested' versus 'parallel' institutions, to create an analytical lens through which to assess the nature and sustainability of nested linkages. Through an analysis of the Chiang Mai Initiative Multilateralization (CMIM) and the Latin American Reserve Fund (FLAR), the article demonstrates the usefulness of this lens. It concludes by considering three circumstances in which fault lines created by these RFAs' institutional design could be activated, permitting an institution to 'leave the nest', including changing intentions of principals, creation of parallel capabilities and facilities, and failure of the global regime to address regional needs in a crisis.