What constitutes bilateral intergovernmental technical cooperation in the financial-sector?: towards the development of a systematic methodology

Abstract

This study attempts to lay the foundation for a methodology of technical cooperation in the financial sector among national governments. Since sustainable economic growth requires sound and efficient financial systems, financial authorities worldwide have actively pursued technical cooperation. Intergovernmental financial-sector technical cooperation presents unique considerations because of its specificity in comparison with technical cooperation in other areas. Nevertheless, this important international activity lacks a systematic methodology. This article makes clear that despite the complex externality, a methodology of financial-sector technical cooperation could be developed within the existing academic frameworks of development finance, historical sociology, comparative institutional analysis and behavioural economics. This finding implies that a recipient authority’s initiative is the most important factor in bringing about institutional change in the financial system. Given the path dependency of an institution, this finding also explains the empirical evidence of why it is more difficult and takes longer than expected to reform a financial system. Therefore, both donor and recipient parties need to keep this in mind and be patient until the effects of a cooperative project emerge. Going forward, it is worthwhile to explore disclosure on cooperative activities and collaboration among donors to an extent that is both possible and appropriate. In addition, there may be room for application of recent psychological findings to improve the relationship between recipient and donor.

Keywords

• International cooperation
• technical assistance
• capacity building/development
• public policy
• financial stability
• economic development