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Begin New Search Publishing Institution Centre for International Governance Innovation Author C. Randall Henning

1. Regional Financial Arrangements and the International Monetary Fund: Sustaining Coherence in Global Financial Governance

Author:
C. Randall Henning
Publication Date:
01-2020
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
Cooperation and competition among regional financial arrangements (RFAs) and the International Monetary Fund (IMF) increasingly determine the effectiveness of the global financial safety net (GFSN), which many observers fear is becoming fragmented. Overlap among these crisis-fighting institutions has important benefits but also pitfalls, including with respect to competition, moral hazard, independence, institutional conflict, creditor seniority and non-transparency. The study reviews the RFAs in Latin America, East Asia and Europe to assess their relationships with the IMF and address these problems. Among other things, it concludes: institutional competition, while harmful in program conditionality, can be beneficial in economic analysis and surveillance; moral hazard depends critically on institutional governance and varies substantially from one regional arrangement to the next; secretariats should be independent in economic analysis, but lending programs should be decided by bodies with political responsibility; and conflicts among institutions are often resolved by key member states through informal mechanisms that should be protected and developed. Findings of other recent studies on the GFSN are critiqued. Architects of financial governance should maintain the IMF at the centre of the safety net but also develop regional arrangements as insurance against the possibility that any one institution could be immobilized in a crisis, thereby safeguarding both coherence and resilience of the institutional complex.
Topic:
Governance, Surveillance, Strategic Competition, and IMF
Political Geography:
Europe, Middle East, Asia, South America, Australia, North America, and Global Focus

2. The Global Liquidity Safety Net: Institutional Cooperation on Precautionary Facilities and Central Bank Swaps

Author:
C. Randall Henning
Publication Date:
03-2015
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
The global financial safety net is incomplete with respect to the provision of liquidity in a crisis and both providers and users would benefit from closing the gaps in coverage. This paper examines the proliferation of precautionary facilities and central bank swaps over the last seven years. It recommends harnessing the surveillance and analytical capacity of the International Monetary Fund (IMF) to the precautionary facilities of regional financial arrangements and the swap agreements of key-currency central banks. First, regional and plurilateral facilities should make the IMF's qualification of a member for a Flexible Credit Line (FCL) sufficient to grant access to one of their own precautionary facilities. Second, qualification for an FCL should create a presumption that key-currency central banks extend swap agreements to those countries' central banks. Inferring the thresholds for qualification from the economic performance of the three countries that have been given FCLs and applying them to recent indicators, the paper identifies the additional countries that would likely qualify. These proposals would exploit the comparative advantage of global and regional institutions while reducing the fragmentation of the system.