IDEAS home Printed from https://ideas.repec.org/p/imf/imfwpa/2002-217.html
   My bibliography  Save this paper

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

Author

Listed:
  • J. J. Polak
  • Mr. Peter B. Clark

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 less reliable and predictable source of reserves, especially in times of crisis.

Suggested Citation

  • J. J. Polak & Mr. Peter B. Clark, 2002. "International Liquidity and the Role of the SDR in the International Monetary System," IMF Working Papers 2002/217, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2002/217
    as

    Download full text from publisher

    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=16235
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Guillermo A. Calvo & Carmen M. Reinhart, 2002. "Fear of Floating," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(2), pages 379-408.
    2. Carmen M. Reinhart & Kenneth S. Rogoff, 2004. "The Modern History of Exchange Rate Arrangements: A Reinterpretation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(1), pages 1-48.
    3. Mr. Robert P Flood & Ms. Nancy P. Marion, 2002. "Holding International Reserves in an Era of High Capital Mobility," IMF Working Papers 2002/062, International Monetary Fund.
    4. Williamson, John, 1973. "Surveys in Applied Economics: International Liquidity," Economic Journal, Royal Economic Society, vol. 83(331), pages 685-746, September.
    5. Bahmani-Oskooee, Mohsen & Malixi, Margaret, 1987. "Effects of exchange rate flexibility on the demand for international reserves," Economics Letters, Elsevier, vol. 23(1), pages 89-93.
    6. Anonymous, 1953. "International Monetary Fund," International Organization, Cambridge University Press, vol. 7(2), pages 273-274, May.
    7. Dani Rodrik & Andres Velasco, 1999. "Short-Term Capital Flows," NBER Working Papers 7364, National Bureau of Economic Research, Inc.
    8. J. Marcus Fleming, 1961. "International Liquidity: Ends and Means," IMF Staff Papers, Palgrave Macmillan, vol. 8(3), pages 439-463, December.
    9. Anonymous, 1953. "International Monetary Fund," International Organization, Cambridge University Press, vol. 7(1), pages 143-145, February.
    10. Lizondo, JoseSaul & Mathieson, Donald J., 1987. "The stability of the demand for international reserves," Journal of International Money and Finance, Elsevier, vol. 6(3), pages 251-282, September.
    11. Anonymous, 1953. "International Monetary Fund," International Organization, Cambridge University Press, vol. 7(4), pages 576-583, November.
    12. Jason Furman & Joseph E. Stiglitz, 1998. "Economic Crises: Evidence and Insights from East Asia," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(2), pages 1-136.
    13. Morris Goldstein (ed.), 1999. "Safeguarding Prosperity in a Global Financial System: The Future International Financial Architecture," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 50, April.
    14. Anonymous, 1953. "International Monetary Fund," International Organization, Cambridge University Press, vol. 7(3), pages 419-420, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Anthony Clunies-Ross & John Langmore, 2006. "Political Economy of Additional Development Finance," WIDER Working Paper Series DP2006-09, World Institute for Development Economic Research (UNU-WIDER).
    2. Agnès Bénassy-Quéré & Damien Capelle, 2014. "On the inclusion of the Chinese renminbi in the SDR basket," International Economics, CEPII research center, issue 139, pages 133-151.
    3. Anthony Clunies-Ross, 2004. "Imminent Prospects for Additional Finance: What Might Be Done Now or Soon and Under What Conditions," WIDER Working Paper Series RP2004-45, World Institute for Development Economic Research (UNU-WIDER).
    4. Ernest Aryeetey, 2004. "A Development-focused Allocation of the Special Drawing Rights," WIDER Working Paper Series DP2004-03, World Institute for Development Economic Research (UNU-WIDER).
    5. Mendoza, Ronald U., 2004. "International reserve-holding in the developing world: self insurance in a crisis-prone era?," Emerging Markets Review, Elsevier, vol. 5(1), pages 61-82, March.
    6. Reis, José Guilherme Almeida dos., 2004. "International finance : meeting the needs of people in developing countries," ILO Working Papers 993701163402676, International Labour Organization.
    7. repec:ilo:ilowps:370116 is not listed on IDEAS
    8. Anthony Clunies-Ross,, 2006. "Ways of Paying for Global Public-Goods," Working Papers id:536, eSocialSciences.
    9. Anthony Barnes Atkinson, 2003. "Innovative Sources for Development Finance: Over-Arching Issues," WIDER Working Paper Series DP2003-88, World Institute for Development Economic Research (UNU-WIDER).
    10. Anthony Clunies-Ross, 2004. "Alternative ways of paying for global public goods," Journal of International Development, John Wiley & Sons, Ltd., vol. 16(7), pages 971-982.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ben Hassine Khalladi, hela, 2015. "Financial Crisis Management in Emerging Countries: Optimal Level of International Reserves and Ex Ante Conditions for an International Lender of Last Resort Intervention," MPRA Paper 96151, University Library of Munich, Germany.
    2. Cédric Achille Mbeng Mezui & Uche DURU, 2013. "Working Paper 178 - Holding Excess Foreign Reserves Versus Infrastructure Finance: What should Africa do?," Working Paper Series 478, African Development Bank.
    3. Michael Michaely, 1971. "An Over-all View of Policy Patterns," NBER Chapters, in: The Responsiveness of Demand Policies to Balance of Payments: Postwar Patterns, pages 30-70, National Bureau of Economic Research, Inc.
    4. Christopher Gilbert & Panos Varangis, 2004. "Globalization and International Commodity Trade with Specific Reference to the West African Cocoa Producers," NBER Chapters, in: Challenges to Globalization: Analyzing the Economics, pages 131-163, National Bureau of Economic Research, Inc.
    5. T.S. Malakhova & P.P. Kapustin & S.A. Morusov & E.E. Udovik, 2020. "European Practice in Ensuring Sustainable Development: Problems and Contradictions," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(Special 1), pages 14-23.
    6. Malakhova T.S. & Dubinina M.A. & Maksaev A.A. & Fomin R.V., 2019. "Foreign Trade and Marketing Processes in the Context of Sustainable Development," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(Special 2), pages 195-202.
    7. Barry Eichengreen, 1989. "The US Capital Market and Foreign Lending, 1920–1955," NBER Chapters, in: Developing Country Debt and the World Economy, pages 237-248, National Bureau of Economic Research, Inc.
    8. Boysen-Hogrefe, Jens & Gern, Klaus-Jürgen & Groll, Dominik & Jannsen, Nils & Kooths, Stefan & Plödt, Martin & van Roye, Björn & Scheide, Joachim & Schwarzmüller, Tim, 2015. "Das europäische Verfahren zur Vermeidung und Korrektur makroökonomischer Ungleichgewichte: Auswertung der bisherigen Erfahrung und mögliche Reformansätze," Kieler Beiträge zur Wirtschaftspolitik 7, Kiel Institute for the World Economy (IfW Kiel).
    9. Jacob A. Frenkel & Morris Goldstein, 1991. "Exchange Rate Volatility and Misalignment: Evaluating some Proposals for Reform," Palgrave Macmillan Books, in: Alfred Steinherr & Daniel Weiserbs (ed.), Evolution of the International and Regional Monetary Systems, chapter 8, pages 99-131, Palgrave Macmillan.
    10. Carlos F. Díaz Alejandro, 1983. "Stories of the 1930s for the 1980s," NBER Chapters, in: Financial Policies and the World Capital Market: The Problem of Latin American Countries, pages 5-40, National Bureau of Economic Research, Inc.
    11. Piersanti, Giovanni, 2012. "The Macroeconomic Theory of Exchange Rate Crises," OUP Catalogue, Oxford University Press, number 9780199653126.
    12. Kwon, Austin, 2017. "Trends in the Accumulation of Net Foreign Reserves since World War II," Studies in Applied Economics 94, The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise.
    13. Javier G. Gómez-Pineda, 2016. "Inflación de costos: las devaluaciones de los años cincuenta y el brote populista de 1963," Borradores de Economia 924, Banco de la Republica de Colombia.
    14. Chrysafis Iordanoglou & Manos Matsaganis, 2017. "Why Grexit cannot save Greece (but staying in the Euro area might)," LEQS – LSE 'Europe in Question' Discussion Paper Series 123, European Institute, LSE.
    15. Javier G. Gómez-Pineda, 2016. "Inflación de costos: las devaluaciones de los años cincuenta y el brote populista de 1963 / Cost-push inflation: the devaluations of the fifties and the 1963 populist outbreak," Borradores de Economia 14204, Banco de la Republica.
    16. Frankel, Jeffrey, 2010. "Monetary Policy in Emerging Markets," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 25, pages 1439-1520, Elsevier.
    17. T.S. Malakhova & M.Ya. Veprikova & A.A. Kovalenko & E.E. Udovik, 2020. "Global Transformation as a Strategic Marketing Factor of Effective Management of Regional Foreign Economic Relations in Modern Conditions," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(Special 1), pages 39-47.
    18. Aradhna Aggarwal & Nagesh Kumar, 2012. "Structural Change, Industrialization and Poverty Reduction: The Case of India," Development Papers 1206, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) South and South-West Asia Office.
    19. Alfaro, Laura & Kanczuk, Fabio, 2009. "Optimal reserve management and sovereign debt," Journal of International Economics, Elsevier, vol. 77(1), pages 23-36, February.
    20. Kocenda, Evzen & Hanousek, Jan & Engelmann, Dirk, 2008. "Currencies, competition, and clans," Journal of Policy Modeling, Elsevier, vol. 30(6), pages 1115-1132.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:2002/217. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Akshay Modi (email available below). General contact details of provider: https://edirc.repec.org/data/imfffus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.