Despite efforts by the world’s major economies to address stresses in the global financial system, by early 2009, the Global Financial Crisis caused developing and lower-income countries to experience shortages of the major reserve currencies. In August 2009, the International Monetary Fund (IMF) distributed a general allocation of Special Drawing Rights (SDR) of unprecedented size—totaling USD 250 billion (SDR 161.3 billion)—to all member countries in an effort to address these issues and provide liquidity to the world’s economies. In September 2009, it also distributed a special “catch-up” allocation of USD 33 billion in SDRs (SDR 21.5 billion) to eligible members that had joined the fund after 1981. SDRs are a reserve currency unit created by the IMF in 1969 to serve as international reserve assets to facilitate the exchange of currencies of IMF members. Although subject to some constraints, member countries can hold SDRs as reserves, use them to settle IMF or member accounts, or exchange them for hard currencies, particularly the US dollar, euro, yen, pound, or renminbi, which are the largest reserve currencies and are used to set the value of SDRs. In the first four months after the allocations, 16 countries sold SDR 2.9 billion for other reserve currencies. While utilization was relatively low, the IMF reported continued sales and downstream use of SDRs, with some developing countries selling more than 80% of their SDRs within a few years.
Ahluwalia et al. (Tue,) studied this question.