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Low-Income Countries Vulnerabilities and the Need for an SDR-Based International Monetary System

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  • Pietro Alessandrini

    ()
    (Universit… Politecnica delle Marche, MoFiR)

  • Andrea Filippo Presbitero

    ()
    (Universit… Politecnica delle Marche, MoFiR)

Abstract

The global financial crisis, the weakening role of the dollar and the increasing importance of China in the global arena are calling for a reform of the international monetary system (IMS) in the direction of a greater multilateralism. We agree with the necessity to reform the IMS and we advance a proposal based on a greater role of the Special Drawing Rights (SDRs), focusing on the potential benefits that a new monetary order could brings to Low-Income Countries (LICs). Given their extreme vulnerability to external shocks and their dependence on the exchange rate vis-vis the US dollar, poor countries would benefit from the creation of a more stable multi-currency monetary system. The new SDRs will created exogenously - with a disproportionate allocation to LICs -, but also endogenously, through the substitution account and the overdraft facility. Finally, we discuss the superiority of this proposal in the context of the current foreign assistance framework.

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Bibliographic Info

Paper provided by Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences in its series Mo.Fi.R. Working Papers with number 55.

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Length: 37
Date of creation: Sep 2011
Date of revision:
Handle: RePEc:anc:wmofir:55

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Keywords: International Mometary System; Key Currency; Low-Income Countries; Reserves; SDR;

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