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On the Bailout of Currencies

  • Stephan UngerEmail author
Article
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Abstract

Special Drawing Rights are reserve assets which ought to provide liquidity in times of a country’s financial distress. It is a potential claim on freely usable currencies of International Monetary Fund member countries. This article examines the possible effects of a global Special Drawing Rights implementation by the International Monetary Fund in case of a collapse of one of the major currencies. The question addressed is if a distressed fiat currency can be bailed out effectively by triggering the designation mechanism to the International Monetary Fund member countries The results indicate that the liquidity benefit per created Special Drawing Rights unit would proportionally increase with the rate of money supply.

Keywords

SDR Monetary policy Foreign exchange Debt Bailout IMF 

JEL Classifications

E40 E42 E50 F01 

Notes

References

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Copyright information

© International Atlantic Economic Society 2019

Authors and Affiliations

  1. 1.Department of Economics & Business Saint Anselm CollegeManchesterUSA

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