ABSTRACT
The search among emerging markets and developing countries for a stable monetary and financial governance regime to protect against financial crises and promote growth is ongoing. Why could some of them like Chile and South Korea successfully adjust their regimes while others could not? A twofold argument to help explain this divergence is advanced in this chapter. The presence of a political-technocratic consensus regarding objectives and conduct of monetary and financial policies is crucial for a stable governance regime. A consensus that is based on a pragmatic governance regime entailing the ability for making continuous adjustments against the background of a rapidly changing international monetary and financial system is more likely to prevent crises. It leads to relative institutional stability that is characterized by incremental change as opposed to punctuated change occurring under orthodox governance regimes.
To make this case, a comparative, socio-historical analysis of changes of governance regimes in Chile and Argentina since the 1970s is conducted. Chile successfully adopted a pragmatic governance regime based on a political-technocratic consensus that was shaped by the 1982 debt crisis. Argentina, in contrast, adopted a pragmatic governance regime only for a brief period (2003–2007) but could not develop a consensus to stabilize it. Recurring financial crises in the second half of the 20th and 21st centuries and punctuated institutional change are a consequence.
