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International Liquidity and the Role of the SDR in the International Monetary System

Author

Listed:
  • Peter B. Clark

    (International Monetary Fund)

  • Jacques J. Polak

    (International Monetary Fund)

Abstract

This paper describes how the changed conditions in the international monetary system have undermined the role originally envisaged for the SDR. It argues that the concept of a global stock of international liquidity, which was fundamental to the creation of the SDR, is now no longer relevant. Nonetheless, there are good reasons to satisfy part of the growing demand for international reserves with SDR allocations: (i) there are efficiency gains, as SDRs can be created at zero resource cost, and thus obviate the need for countries to run current account surpluses or engage in expensive borrowing to obtain reserves, and (ii) there would be a reduction in systemic risk, as SDRs would substitute to some extent for borrowed reserves, which are a less reliable and predictable source of reserves, especially in times of crisis. Copyright 2004, International Monetary Fund

Suggested Citation

  • Peter B. Clark & Jacques J. Polak, 2004. "International Liquidity and the Role of the SDR in the International Monetary System," IMF Staff Papers, Palgrave Macmillan, vol. 51(1), pages 1-3.
    • Handle: RePEc:pal:imfstp:v:51:y:2004:i:1:p:3
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    Citations

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    Cited by:

    1. Edwin M. Truman, 2023. "The Case for Annual Special Drawing Right Allocations," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 51(1), pages 65-70, March.
    2. Pietro Alessandrini & Andrea Presbitero, 2012. "Low-Income Countries and an SDR-based International Monetary System," Open Economies Review, Springer, vol. 23(1), pages 129-150, February.
    3. Bracke, Thierry & Fidora, Michael, 2012. "The macro-financial factors behind the crisis: Global liquidity glut or global savings glut?," The North American Journal of Economics and Finance, Elsevier, vol. 23(2), pages 185-202.
    4. Pietro Alessandrini & Andrea Filippo Presbitero, 2011. "Low-Income Countries Vulnerabilities and the Need for an SDR-Based International Monetary System," Mo.Fi.R. Working Papers 55, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
    5. José Antonio Ocampo, 2014. "The Provision of Global Liquidity: The Global Reserve System," WIDER Working Paper Series wp-2014-141, World Institute for Development Economic Research (UNU-WIDER).
    6. Ocampo, José Antonio, 2014. "The provision of global liquidity: The global reserve system," WIDER Working Paper Series 141, World Institute for Development Economic Research (UNU-WIDER).
    7. Mercea Handro Patricia Amalia, 2017. "Opinions On International Reserves Management - Post Crisis," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 1, pages 246-252, December.
    8. Gurgen OHANYAN, 2015. "Recent Changes of IMF Conditionality and Its Effects on Social Spending," REVISTA DE MANAGEMENT COMPARAT INTERNATIONAL/REVIEW OF INTERNATIONAL COMPARATIVE MANAGEMENT, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 16(5), pages 591-602, December.
    9. Fidora, Michael & Bracke, Thierry, 2008. "Global liquidity glut or global savings glut? A structural VAR approach," Working Paper Series 911, European Central Bank.
    10. Camelia Marin & Isabella Sima & Mihaela Ruxanda & Manole Sorin, 2012. "The International Role Of The Euro And Implications On Romanian Gdp. Case Study: Vâlcea County," Anale. Seria Stiinte Economice. Timisoara, Faculty of Economics, Tibiscus University in Timisoara, vol. 0, pages 280-288, November.

    More about this item

    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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