Low-Income Countries Vulnerabilities and the Need for an SDR-Based International Monetary System
AbstractThe 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 InfoPaper 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.
Date of creation: Sep 2011
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International Mometary System; Key Currency; Low-Income Countries; Reserves; SDR;
Find related papers by JEL classification:
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
- F35 - International Economics - - International Finance - - - Foreign Aid
- F55 - International Economics - - International Relations and International Political Economy - - - International Institutional Arrangements
- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
- O19 - Economic Development, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-10-01 (All new papers)
- NEP-CBA-2011-10-01 (Central Banking)
- NEP-IFN-2011-10-01 (International Finance)
- NEP-MON-2011-10-01 (Monetary Economics)
- NEP-OPM-2011-10-01 (Open Economy Macroeconomic)
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