Allocative Inefficiency of Special Drawing Rights (SDRs): Issues and Challenges of International Political Economy
Journal Title: FOCUS: Journal of International Business - Year 2017, Vol 4, Issue 2
Abstract
When the global monetary system faced the problem of inadequate supply of gold reserves, it led to the emergence of new paper gold in the form of Special Drawing Rights (SDRs). SDRs are used by member nations of IMF for a wide variety of transactions on IMF’s Operations Division and Administered Accounts in proportion to their quotas. Lately, the IMF has been subjected to extensive criticism on issues of recent allocation of SDRs and the related weighted voting rights. At present, the SDRs measurement is based on weighted average and a significant size of SDRs quota is allocated to developed countries due to their higher weight ratio. The SDRs quota allocated to developing and least developed countries is insufficient because they possess low weight ratio and low value. Further, the IMF does not follow the universal membership in which one country get one vote right; these allocated SDRs reflect the voting power of member nations. If a few countries with high SDRs collude with one another, it can lead to a decision favouring these countries due to a high percentage of voting rights with them. This could also result in these countries having their own representatives in the highest decision-making body, i.e. Board of Governors. This paper argues that the method of quota allocation needs to be reworked for better allocative efficiency purpose, to achieve a progressive and inclusive international economic order.
Authors and Affiliations
Hiteshkumar Thakkar
Keywords
Related Articles
- EP ID EP623904
- DOI 10.17492/focus.v4i02.11688
- Views 186
- Downloads 0
Role of Innovation in a Globalised World: A Review of Literature
In today’s competitive environment, innovation has an important role to play. This is extremely important for the growth of firms as well as the nation as it provides the requisite competitiveness to them. Innovation is...
What worth is a BIT? Impact of BITs on FDI Inflows into India
Developing countries often consider foreign direct investment (FDI) as an engine to boost economic growth. Therefore they try to promote investment inflow by various means. One approach is to offer investment guarantees...
Economic Growth and Role of ‘The Missing Half’: A Cross-Country Analysis with Specific Reference to India
Women’s employment is an imperative factor in their advancement towards economic independence yet there is relatively inadequate and mixed evidence on the relationship between economic growth and female labour force part...
An Examination into the Role of Taxation in FDI Inflows and Stock in High, Middle and Low Income Countries
Many countries of the world are redesigning their taxation policies to offer a conducive tax environment to the MNCs so as to increase the level of FDI in the country. Through changes in taxation policy, they intend to b...
Price Discovery Mechanism in Spot and Futures Market of Agricultural Commodities: The Case of India
There has been increasing focus by emerging market researchers, policymakers and regulators for investigating price discovery, relationship between future and physical market and accessible trading and risk management in...