Voice and Exit: How Emerging Powers are Promoting Institutional Changes in the International Monetary System

Abstract

In the aftermath of the 2008 crisis, emerging powers engaged in political and legal strategies to challenge the actual framework for global monetary governance. This article examines two categories of monetary strategies designed as “voice” and “exit” plans (Hirschman 1970). For the former, they aimed at gaining more participation inside the International Monetary Fund (IMF). For the latter, strategies were built as legal alternatives to manage future liquidity crises outside the current framework. Using this theoretical classification, this paper identifies institutional responses formulated by the G20 emerging powers in Asia and Latin America after 2008 crisis. The specific approach proposed by this article is to analyse how the legal framework for the management of international money influences their strategies’ design and outcomes. Up to present, it seems voice strategies are promoting only incremental modifications in institutions. Exit strategies, however, have the potential of being more successful. These strategies have been built as a network of bilateral swap contracts between central banks. Asian powers are more engaged in this type of legal strategy. Latin American countries tend to be recipients of these plans. Exit strategies, however, are moving multilateral cooperation away from the IMF, reinforcing institutional fragmentation and uncertainty on how the next liquidity crises would be managed.