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International Liquidity and the Role of the SDR in the International Monetary System Peter B. Clark and Jacques J. Polak Full Text of this Article (PDF 160K) 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. |
