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Understanding Special Drawing Rights (SDRs)

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  • John Williamson

    (Peterson Institute for International Economics)

Abstract

Special Drawing Rights (SDRs), the reserve asset issued by the International Monetary Fund (IMF), have lately reappeared in the news. The G-20 leaders, at their recent meeting in London, endorsed a proposal to issue $250 billion in SDRs to counteract the financial crisis, while the governor of the People's Bank of China has called for SDRs to gradually replace the dollar at the center of the international monetary system, a plan that would be facilitated by allowing countries to convert their dollar reserve holdings into SDRs. John Williamson reviews the history of the IMF's SDRs and provides an overview of these and other proposals that would increase this synthetic currency's role in the international monetary system. The SDR was originally created to resolve a recognized flaw in the structure of the postwar Bretton Woods monetary system, but the eventual breakdown of Bretton Woods and the subsequent evolution of the current dollar-centered system have relegated the SDR mostly to the minor role of serving as a unit of account for the IMF's transactions. Recent proposals would return the SDR to greater prominence and could help to create a financial system that is free from the imbalances that have plagued the world of late.

Suggested Citation

  • John Williamson, 2009. "Understanding Special Drawing Rights (SDRs)," Policy Briefs PB09-11, Peterson Institute for International Economics.
    • Handle: RePEc:iie:pbrief:pb09-11
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    File URL: https://www.piie.com/publications/policy-briefs/understanding-special-drawing-rights-sdrs
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    Cited by:

    1. Bowen, Alex, 2011. "Raising finance to support developing country action: some economic considerations," LSE Research Online Documents on Economics 37572, London School of Economics and Political Science, LSE Library.
    2. xavier Ragot & Francois Le Grand, 2018. "Sovereign Default and Liquidity: The Case for a World Safe," 2018 Meeting Papers 889, Society for Economic Dynamics.
    3. Le Grand, François & Ragot, Xavier, 2021. "Sovereign default and liquidity: The case for a world safe asset," Journal of International Economics, Elsevier, vol. 131(C).
    4. Edwin M. Truman, 2013. "The Congress Should Support IMF Governance Reform to Help Stabilize the World Economy," Policy Briefs PB13-7, Peterson Institute for International Economics.
    5. Ocampo, José Antonio, 2014. "The provision of global liquidity: The global reserve system," WIDER Working Paper Series 141, World Institute for Development Economic Research (UNU-WIDER).
    6. C. Randall Henning, 2009. "US Interests and the International Monetary Fund," Policy Briefs PB09-12, Peterson Institute for International Economics.
    7. Yiping Huang & Daili Wang & Gang Fan, 2014. "Paths to a Reserve Currency : Internationalization of the Renminbi and Its Implications," Macroeconomics Working Papers 24165, East Asian Bureau of Economic Research.
    8. repec:hal:spmain:info:hdl:2441/3jhmd4ib388m99gnolvi8klga2 is not listed on IDEAS
    9. José Antonio Ocampo, 2017. "Resetting the International Monetary (Non)System," Books, Red Investigadores de Economía, number 2017-11, May.
    10. Alex Bowen, 2011. "Raising climate finance to support developing country action: some economic considerations," Climate Policy, Taylor & Francis Journals, vol. 11(3), pages 1020-1036, May.
    11. repec:hal:wpspec:info:hdl:2441/3jhmd4ib388m99gnolvi8klga2 is not listed on IDEAS
    12. Azar R. Hasanli, 2020. "Global Liquidity Challenges of the International Monetary System," Proceedings of the 17th International RAIS Conference, June 1-2, 2020 032ah, Research Association for Interdisciplinary Studies.
    13. José Antonio Ocampo, 2014. "The Provision of Global Liquidity: The Global Reserve System," WIDER Working Paper Series wp-2014-141, World Institute for Development Economic Research (UNU-WIDER).
    14. Arvind Subramanian, 2011. "Renminbi Rules: The Conditional Imminence of the Reserve Currency Transition," Working Paper Series WP11-14, Peterson Institute for International Economics.
    15. George Hoguet & Solomon Tadesse, 2011. "The role of SDR-denominated securities in official and private portfolios," BIS Papers chapters, in: Bank for International Settlements (ed.), Portfolio and risk management for central banks and sovereign wealth funds, volume 58, pages 165-186, Bank for International Settlements.
    16. Guido Montani, 2011. "Money and Finance as Global Public Goods," SAGE Open, , vol. 1(3), pages 21582440114, October.

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