Introduction

Abstract

This study is concerned with a class of international institutions — exemplified by payments unions and clearing houses — the formation of which allows a group of countries whose currencies are inconvertible internationally to eliminate or at least to reduce the severity of barriers to free trade and payments among themselves, i.e. within a region. Such institutions, which we genetically label regional payments arrangements (RPAs), have been established in several regions during the past four decades, operating with varying degrees of success. In analysing virtually any economic institution, three classes of concerns are relevant: those related to theory, measurement, and policy. We address these sets of issues to differing degrees.

To my way of thinking, the true functions of analytical economics are best described informally; to organize our incomplete perceptions about the economy, to see connections that the untutored eye would miss, to tell plausible — perhaps even convincing — causal stories with the help of a few central principles, and to make rough quantitative judgements about the impact of economic policy and other exogenous events (Solow 1986, 11).