Policy Papers

<strong><span>This paper explores whether a broader role for the SDR could contribute to the smooth functioning and stability of the international monetary system (IMS).</span></strong><span> Recent staff assessments highlighted that the IMS has displayed considerable resilience. But episodes of stress point also to some weaknesses, including in external adjustment mechanisms; limitations of official liquidity provisions through the Global Financial Safety Net </span><span>(GFSN); and large-scale reserve accumulation&mdash;with systemic side effects. Those weaknesses, together with the expansion of the SDR basket, have renewed interest in the SDR and motivated a discussion of </span><span>whether there is an economic rationale for a broader SDR role. The paper looks into how those weaknesses can be mitigated by three concepts of the SDR: the official SDR, the reserve asset administered by the IMF (O-SDR); SDR-denominated financial instruments, or &ldquo;market SDRs&rdquo; (M-SDR); and the SDR as a unit of account (U-SDR).</span><span> </span><span>However, the paper does not propose specific reform options.</span><br />