Reducing the Costs of Holding Reserves
A New Perspective on Special Drawing Rights
This chapter examines the issues concerning the cost of holding reserves and Special Drawing Rights (SDR). It analyzes the original reasons for the introduction of the SDR mechanism at the end of the 1960s and the radical changes in the international monetary system since then that invalidated these reasons. It concludes that the resumption of regular allocations of SDR could make a substantial contribution to both the equity and the efficiency of the international monetary system, and it would thus have important qualities of a global public good.
Keywords: holding reserves, Special Drawing Rights, monetary system, public finance, public good
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