Latin America Initiative | Working Paper
Building a Stable and Equitable Global Monetary System Based on SDRs
August 31, 2012 | Bilge Erten, José Antonio Ocampo
Table of Contents
Author(s)
Bilge Erten
Post-doctoral Fellow, Committee on Global Thought, Columbia UniversityAbstract
This paper argues that SDRs should become a more relevant instrument of international monetary cooperation. This requires transforming them into a pure reserve asset and the IMF into a fully SDR-funded institution. SDRs would then be issued counter-cyclically and treated as deposits of countries in the IMF, which can in turn lend to countries. This approach would correct basic deficiencies of the current global monetary system. Complementary reforms include a substitution account for an orderly and smooth transition from major reserve currencies to SDRs, and the issuance of SDR-denominated bonds as an alternative to other major short-term assets.
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