Poverty and Development Division
last updated : 27 April 2000
The philosophical basis for advocating regional/subregional arrangements is the principle of subsidiarity. This principle demands that what a subordinate or local organization can do more effectively should not be taken over by a dominant central organization. In crisis prevention, for instance, this takes the form of deploying at the regional level the same measures and instruments that are being developed at the global level. It means that such measures might be more effectively implemented through stronger regional institutions or mechanisms in which many more countries can participate more meaningfully than they can in a global forum. A regional mechanism could be a more natural disciplinarian as the countries that make up the region are likely to have a common stake in maintaining economic and financial stability and presumably would have the greatest incentive for implementing mutually beneficial policies. Moreover, the "psychic distance" between policy makers among countries in a region is likely to be small. Regional arrangements can, therefore, facilitate more meaningful dialogue and cooperation in formulating policy responses. Such responses are also likely to enjoy a greater degree of ownership and hence stand a better chance of being implemented.
Regional arrangements are a mezzanine level, between national measures and global (for example, IMF and BIS) mechanisms to undertake monitoring and surveillance and early warning. The last two are not sufficient by themselves. All these mechanisms should be implemented in a coordinated manner and should support each other in order to build robust economic and financial systems in the region.
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