Enhanced Special Drawing Rights: How China Could Contribute to a Reformed International Monetary Architecture
by Geng Xiao, Matthew Harrison
ARTICLE | China & World Economy | Vol. 26, 2018
Abstract
Since the end of the Bretton Woods era, the world has operated on a de facto system of free-floating exchange rates, with the US dollar as the dominant international currency. The system, characterized by large pro-cyclical capital flows and chronic imbalances, is inherently unstable, and has contributed to repeated crises, recessions and geopolitical tensions. One potentially “least-difficult” line of reform would be to allow the evolution of a multi-currency system, underpinned by an expanded role for Special Drawing Rights (SDRs). Attempts to promote wider use of the SDR have foundered on the liquidity premium. However, for Chinese corporations and institutions, at present restricted in their capital account activities, the SDR liquidity premium would appear less daunting. The Chinese authorities could provide policy encouragement for the use of SDRs by their institutions. This initiative, supported by China’s Special Administrative Region Hong Kong, would kick-start an international SDR ecosystem, and encourage even broader use of SDRs, to the benefit of international monetary stability
Popular Articles
-
International Student Profile: Kevin Kurnia
Oct 12 2017
-
Start your application to join PHBS!
Sep 18 2018
-
PHBS Opening a Campus in UK: Se...
Feb 22 2017
Latest News
-
Thomas Hübl: The Symbiosis betwe...
Time:Apr 24 2019
-
Alum Profile: Markey Tan’s Rise in the Shenzhen Tech World
Time:Apr 11 2019
-
Professor Xiao Geng: China and Its Western Critics
Time:Apr 09 2019
Campus Events