Special drawing rights, Microeconomics

Special Drawing Rights:

SDRs are entitlement granted to member countries enabling them to draw from the IMF apart from their quota. It is similar to a bank granting a credit limit to the customer. When SDRs are allocated, the country's Special Drawing Account with the IMF is credited with the amount of the allotment. 

SDR is not a currency. It is merely an asset created out of book entries. As such it is an independent reserve asset. The volume of SDRs can be increased or decreased according to the reserve needs of the international liquidity. Initially, the value of one SDR was equal to a specific quantity of gold (which equalled the value of 1 US Dollar) and provided with an absolute gold value guarantee. That is why SDRs were popularly known as ‘Paper Gold'. Later, the value of SDR was linked to a basket of five currencies. The basket is reviewed every five years. It currently, consists of the Euro, the Yen, the Pound sterling and the US Dollor. When a member country utilises SDRs in holding would be less than the allocation. SDRs can be used directly among the members. A country may swap SDRs with another country to acquire a currency it desires. SDRs may be utilised to pay charges to IMF. SDR may be utilised to pay charges to IMF. SDR has gained importance both as a reserve asset and as a Unit of settlement of international transactions. Some international banks time deposits designated in SDR. Some countries have pegged their currencies to SDR.

 

Posted Date: 11/9/2012 6:23:35 AM | Location : United States







Related Discussions:- Special drawing rights, Assignment Help, Ask Question on Special drawing rights, Get Answer, Expert's Help, Special drawing rights Discussions

Write discussion on Special drawing rights
Your posts are moderated
Related Questions
Consider a thin transparent plate whose thickness d(x,y) is a square (instead of a sinusoidal) periodic function of x of period Δ=λ. Show that the angle θ between the diffracted wa

What caused the productivity slowdown?  Observers have pointed to 4 factors--Oil prices, baby boom, increased problems of economic measurement and environmental protection expe


graphical illustration describing the influence of an increase in immigrants on the market supply of labour


Individual demand curves for two perfectly competitive market TC1=10q1+1/2q1^2+100 = firm 1 TC2=10q2+q2^2+100

Normal 0 false false false EN-IN X-NONE X-NONE MicrosoftInternetExplorer4

electronic configuration of s block elements

WTO Agreements: The WTO administers 29 agreements; these cover different areas like trade in goods and services, investment measures, intellectual property rights, etc. Some o