The political economy of global reserve assets

This article focuses on the political economy that shaped the Special Drawing Right (SDR) by examining the three drivers of reform that influenced the creation of the SDR and resulted in changes in the international monetary system (IMS) and the International Monetary Fund (IMF). The three factors examined are, first, informal intergovernmental forums working outside the framework of the IMF; second, the eclipse of the IMF as the central institution of the IMS; and finally, the lack of reference to the private sector in the discussions, even though capital movements were the central cause of strains in the IMS. The article concludes that the resulting limitations of the SDR solution—an institutional change brought about by the compromise between parties to the discussions—meant that major imperfections in the IMS remained unresolved.