Why SDRs Could Rival the Dollar
AbstractThe special drawing rights (SDRs)--the International Monetary Fund's unit of account--could emerge as a rival to the US dollar as an international reserve currency. Williamson questions the assertion of Cato Institute's Swaminathan Aiyar that the SDR is not a currency and can never be one and the relevance of the fact that the IMF has no GDP and no taxing capacity and so lacks the fundamental requirements for creating a currency. It is true that only central banks accept SDRs in settlement of debts. But to the extent that they are so accepted, Williamson argues, they are money and could play a far more central role in the international monetary system than they have so far. Large SDR allocations could be a mechanism to ensure consistency in balance of payments objectives sought by countries around the world, one that ensures a much fairer distribution of gains from seigniorage--profit that accrues to whoever issues money. In the case of the SDRs, the IMF would be the issuer, and the seigniorage gains would be distributed in proportion to IMF quotas, which determine the proportion of allocations. For most countries, there is a clear advantage in boosting the role of the SDR and achieving a portion of the seigniorage gains. The interests of major reserve-currency countries, like the United States and potentially China, in displacing the dollar's reserve role can be disputed, but these countries too would benefit from an enhanced role of the SDR, depending on the evaluation of advantages and disadvantages.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Peterson Institute for International Economics in its series Policy Briefs with number PB09-20.
Date of creation: Sep 2009
Date of revision:
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Pedro BAÇÃO & António Portugal DUARTE & Mariana SIMÕES, 2013.
"The International Monetary System in Flux: Overview and Prospects,"
Chapters of Financial Aspects of Recent Trends in the Global Economy book,
in: Rajmund Mirdala (ed.), Financial Aspects of Recent Trends in the Global Economy, volume 1, chapter 10, pages 192-206
- Pedro Bação & António Portugal Durate & Mariana Simões, 2013. "The International Monetary System in Flux: Overview and Prospects," GEMF Working Papers 2013-07, GEMF - Faculdade de Economia, Universidade de Coimbra.
- Vivekanand Jayakumar & Barbara Weiss, 2011. "Global reserve currency system: Why will the dollar standard give way to a tripolar currency order?," Frontiers of Economics in China, Springer, vol. 6(1), pages 92-130, March.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peterson Institute webmaster).
If references are entirely missing, you can add them using this form.