Regional Financial Arrangements in the Global Financial Safety Net: The Arab Monetary Fund and the Eurasian Fund for Stabilization and Development

ABSTRACT The so‐called global financial safety net provides backstop insurance during financial crises. The three elements of the global safety net — the IMF, regional financial arrangements (RFAs) and bilateral swap agreements — underwent substantial changes after the global financial crisis. How have these changes influenced their use? What role do RFAs have in the safety net? This contribution addresses these questions by examining the timeliness, volume and policy conditionality of liquidity provision of each of the three elements, using a data set of 50 RFA member countries from the period 1976–2015. The article presents case studies of the Arab Monetary Fund (AMF) and the Eurasian Fund for Stabilization and Development (EFSD) to create a deeper institutional understanding of the governance mechanisms of regional funds. The authors find that today's global financial safety net produces inequalities in emergency liquidity provision. In terms of volume, RFAs improve the safety net only for small member countries — about one‐third of the countries in the sample can access sufficient liquidity regionally. The experiences of AMF and EFSD demonstrate that intra‐regional asymmetries of RFAs play a contradictory role: while the participation of large economies leverages liquidity provision, it simultaneously creates difficulties for the governance of the regional body.