The Structure of Regional Payments Arrangements

Abstract

A regional payments arrangement (RPA) is an institutional mechanism to facilitate the multilateral clearing of payments transactions among a limited group of countries, which allows these countries to reduce the severity of barriers to trade and payments among themselves. The various RPAs that have operated in the post-1945 period differ from each other in many important respects. This variety notwithstanding, we may identify four logically distinct elements that are incorporated in an RPA, each of which brings potential benefits and entails particular risks for participating countries. Those elements are the multilateral clearing and settlement of payments, the extension of interim credit, the extension of medium-term credit, and the institutionalization of the balance of payments adjustment process within the region. In the first four sections of this chapter we examine in turn the implications of each of these four elements, using examples from actual RPAs. In Section 2.5 we propose a new typology of regional payments arrangements that reflects the crucial differences among RPAs identified in this chapter.