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Reforming the Global Financial Architecture: The Potential of Regional Institutions

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Reforming the Global Financial Architecture: The Potential of Regional Institutions

Publié le 2 avril 2004

Uniquement disponible en anglais

Regional financial organizations, including those without any industrial-country members, are likely to play a growing role in preventing or mitigating crises and in attracting long-term capital for development. Organizations comprising, or dominated by, emerging market countries will be the most successful because of their economic strength, readier access to markets, and bargaining power in the global economy. However, all regional financial organizations face greater challenges in mobilizing shortterm than longer-term financing, although there is greater likelihood that those featuring emerging market countries will be able to undertake regional arrangements to prevent or mitigate short-term crises along the lines of the Chiang Mai Initiative. Similarly, the experience of the CAF (Andean Development Bank) suggests that regional organizations can also be very adept at mobilizing long-term development financing, provided the membership includes prominent emerging markets; additionally, portfolio composition and astute management are key factors.

Regional financial organizations comprising or dominated by the poorest or lowerincome countries face much greater challenges, whether for short-term or longer-term financing purposes, unless they include donor or industrial countries in their membership. Considerably more thought and discussion is needed to develop regional mechanisms to address their particular short-term needs, whether for natural or man- made calamities, or for capital-account, commodity or aid shocks. For such groupings, partnerships with donor countries seem inescapable for the foreseeable future. However, it is important that the terms of the partnership are right for the developing countries. An excessively restrictive policy framework, ostensibly to appease donors, may unduly constrain growth and development potential.

Author: Roy Culpeper

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