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Special drawing rights, quality of institutions and economic growth

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  • Sodokin, Koffi

Abstract

This study investigates how Special Drawing Rights (SDRs) influence economic growth through threshold effects and institutional channels. Using International Monetary Fund and World Bank data for a global panel spanning 2008–2022, disaggregated by income group and region, I estimate dynamic panel threshold models using the generalized method of moments. In these models, real GDP growth is specified as a function of SDR allocation, public debt, official development assistance, foreign direct investment, trade openness, and government effectiveness. The results reveal statistically significant nonlinearities in the SDR–growth relationship. At moderate levels, SDR allocations are associated with faster growth, consistent with the alleviation of external financing constraints; however, the marginal contribution of additional SDRs declines and eventually becomes negative once allocations exceed a country- and governance-specific share of GDP. The estimated thresholds are higher for low-income and sub-Saharan African economies, reflecting greater external financing needs. Moreover, institutional quality shifts the growth-maximizing threshold and conditions the marginal effects of the SDRs. These findings imply that proposals to reallocate or recycle SDRs should account for heterogeneity in recipient countries’ income levels and governance because uniform allocation rules may undermine the growth benefits of this global liquidity instrument.

Suggested Citation

  • Sodokin, Koffi, 2026. "Special drawing rights, quality of institutions and economic growth," Economic Analysis and Policy, Elsevier, vol. 91(C), pages 987-1006.
    • Handle: RePEc:eee:ecanpo:v:91:y:2026:i:c:p:987-1006
    DOI: 10.1016/j.eap.2026.03.046
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    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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