The Special Drawing Right (SDR) is an international reserve asset created by the IMF in 1969 to support the Bretton Woods system of fixed exchange rates. The SDR is defined as a basket of currencies consisting of the US dollar, euro, Japanese yen, and British pound. SDRs can be exchanged between IMF member countries and are used by some countries to value their currency or for international financial instruments. The IMF allocates SDRs to member countries to build their currency reserves as a low-cost alternative to debt financing.
This document outlines several theories of international trade, including: mercantilism, absolute advantage, comparative advantage, factor proportions, product life cycle, and new trade theory. It provides details on the key aspects and assumptions of each theory, such as mercantilism focusing on accumulating gold/silver through trade surpluses, absolute advantage examining country efficiencies, and comparative advantage arguing countries should import goods they are comparatively more efficient in producing. The document also discusses applications and limitations of the various theories.
This document discusses and compares theories of comparative advantage and the Heckscher-Ohlin theory of international trade. The comparative advantage theory states that countries benefit from specializing in goods they can produce relatively more efficiently. The Heckscher-Ohlin theory extends this by attributing comparative advantage to differences in factor endowments like capital, labor, and land between countries. It predicts that countries will export goods intensive in their abundant factors and import goods intensive in their scarce factors. While comparative advantage focuses on opportunity costs, Heckscher-Ohlin explains specialization through differences in national resources.
The document discusses the price mechanism, which refers to how prices of goods and services affect their demand and supply. The price mechanism influences both buyers and sellers as they negotiate prices. It allocates scarce resources efficiently through market signals and incentives, rationing supply when demand is high. When demand increases, prices rise, causing movement along the supply curve. As an example, the 1970s oil crisis caused oil prices to spike, incentivizing more nations to produce their own oil and shifting the supply curve rightward over the long term.
1. The document discusses the price mechanism and how market prices adjust to changes in supply and demand. It explains how prices serve to allocate scarce resources and provide incentives to producers.
2. Diagrams are used to illustrate how equilibrium price and quantity change with shifts in supply and demand. Examples are given of factors that cause supply or demand for goods like crude oil and aluminum to increase or decrease.
3. Stakeholders that benefit and lose from higher oil prices are identified. The effects of changes in the market for aluminum are also analyzed using supply and demand diagrams.
This document summarizes several theories of international business and trade. It discusses theories including absolute advantage, comparative advantage, factor proportions theory, product life cycle theory, and theories related to country size, similarity, and dependence. The theories aim to explain patterns of specialization and trade between countries based on factors such as resources, costs, demand, and political/cultural relationships.
Chapter 2 Theories Of International Tradehardikdesai
The document discusses various theories of international trade and barriers to trade. It describes theories such as absolute advantage, comparative advantage, Heckscher-Ohlin model, imitation gap theory, and international product life cycle theory. It also discusses tariff and non-tariff barriers that governments use to discourage imports such as import quotas, embargoes, subsidies, and technical standards. Comparative advantage theory holds that countries can benefit from trade even if one has an absolute advantage in all goods, as long as opportunity costs differ between countries.
Economics-Theories of International Trade.Chhavi Sharma
This document summarizes several theories of international trade, including:
- Mercantilism, which held that nations should maximize exports and minimize imports to accumulate wealth. Jean-Baptiste Colbert was a prominent proponent.
- Adam Smith's theory of absolute advantage, which argued nations should specialize in what they produce most efficiently and trade.
- David Ricardo's theory of comparative advantage, which showed that free trade benefits all nations by allowing them to specialize according to their relative costs of production.
- The Heckscher-Ohlin theorem, which posits that countries will export goods that intensively use their abundant and cheaply available factors of production.
This document outlines several theories of international trade, including: mercantilism, absolute advantage, comparative advantage, factor proportions, product life cycle, and new trade theory. It provides details on the key aspects and assumptions of each theory, such as mercantilism focusing on accumulating gold/silver through trade surpluses, absolute advantage examining country efficiencies, and comparative advantage arguing countries should import goods they are comparatively more efficient in producing. The document also discusses applications and limitations of the various theories.
This document discusses and compares theories of comparative advantage and the Heckscher-Ohlin theory of international trade. The comparative advantage theory states that countries benefit from specializing in goods they can produce relatively more efficiently. The Heckscher-Ohlin theory extends this by attributing comparative advantage to differences in factor endowments like capital, labor, and land between countries. It predicts that countries will export goods intensive in their abundant factors and import goods intensive in their scarce factors. While comparative advantage focuses on opportunity costs, Heckscher-Ohlin explains specialization through differences in national resources.
The document discusses the price mechanism, which refers to how prices of goods and services affect their demand and supply. The price mechanism influences both buyers and sellers as they negotiate prices. It allocates scarce resources efficiently through market signals and incentives, rationing supply when demand is high. When demand increases, prices rise, causing movement along the supply curve. As an example, the 1970s oil crisis caused oil prices to spike, incentivizing more nations to produce their own oil and shifting the supply curve rightward over the long term.
1. The document discusses the price mechanism and how market prices adjust to changes in supply and demand. It explains how prices serve to allocate scarce resources and provide incentives to producers.
2. Diagrams are used to illustrate how equilibrium price and quantity change with shifts in supply and demand. Examples are given of factors that cause supply or demand for goods like crude oil and aluminum to increase or decrease.
3. Stakeholders that benefit and lose from higher oil prices are identified. The effects of changes in the market for aluminum are also analyzed using supply and demand diagrams.
This document summarizes several theories of international business and trade. It discusses theories including absolute advantage, comparative advantage, factor proportions theory, product life cycle theory, and theories related to country size, similarity, and dependence. The theories aim to explain patterns of specialization and trade between countries based on factors such as resources, costs, demand, and political/cultural relationships.
Chapter 2 Theories Of International Tradehardikdesai
The document discusses various theories of international trade and barriers to trade. It describes theories such as absolute advantage, comparative advantage, Heckscher-Ohlin model, imitation gap theory, and international product life cycle theory. It also discusses tariff and non-tariff barriers that governments use to discourage imports such as import quotas, embargoes, subsidies, and technical standards. Comparative advantage theory holds that countries can benefit from trade even if one has an absolute advantage in all goods, as long as opportunity costs differ between countries.
Economics-Theories of International Trade.Chhavi Sharma
This document summarizes several theories of international trade, including:
- Mercantilism, which held that nations should maximize exports and minimize imports to accumulate wealth. Jean-Baptiste Colbert was a prominent proponent.
- Adam Smith's theory of absolute advantage, which argued nations should specialize in what they produce most efficiently and trade.
- David Ricardo's theory of comparative advantage, which showed that free trade benefits all nations by allowing them to specialize according to their relative costs of production.
- The Heckscher-Ohlin theorem, which posits that countries will export goods that intensively use their abundant and cheaply available factors of production.
The document discusses the main functions of the price mechanism, which are to allocate scarce resources, ration goods when demand exceeds supply, send signals to producers and consumers about market conditions, and provide incentives. It provides examples of how prices change to perform these functions in markets for goods like food, housing, and cotton. The document also examines factors that can cause price volatility, like shifts in supply and demand, and how elasticity influences the impact of these shifts on price and quantity.
International Trade, Comparative Advantage, and ProtectionismNoel Buensuceso
International trade occurs as economies specialize based on comparative advantages. Comparative advantage means a country can produce a good at a lower opportunity cost than other nations. When countries specialize and trade according to their comparative advantages, both nations maximize total output and allocate resources more efficiently. Exchange rates determine the terms of trade between nations by setting the price of one currency in terms of another. A country's factor endowments like resources and labor explain much of world trade patterns as countries specialize in goods that intensively use their abundant, low-cost factors. However, some argue for trade barriers like tariffs, quotas, and subsidies to protect domestic industries, jobs, and national security from foreign competition.
This document provides notes on international trade concepts. It begins with reasons why nations trade, such as lower prices, greater choice, and differences in resources. It then discusses absolute and comparative advantage using an example of an industrialized country trading with a developing country. Key terms like imports, exports, tariffs, and protectionism are defined. Arguments for and against protectionism are outlined. The document concludes with an overview of the history and functions of the World Trade Organization.
Let's face it. At some point of time in our school or college, we face a typically difficult assignment with a tricky problem, a complex equation or a case study on an obscure concept. Do you wish you had access to a qualified tutor who could help you at that moment?
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The document summarizes David Ricardo's theory of comparative advantage from 1817. It explains that Ricardo formalized the idea that countries can benefit from trade even if one country is more productive in all areas. Ricardo used a numerical example to show that if countries specialize in their comparative advantage goods, where their productivity is relatively higher, then total production can increase. The theory assumes differences in productivity across countries and industries and argues countries should allocate resources to comparative advantage industries to maximize global output through specialization and trade.
International trade occurs between countries due to differences in factors of production and limited mobility between countries. There are three main reasons for international trade: diversity of production conditions between countries, increasing returns to scale, and differences in tastes for goods. International trade has advantages like increased world output, variety of goods and services, and economic growth. However, it also has disadvantages such as economic and political interdependence and depletion of national reserves. Countries employ protectionist policies and trade barriers like tariffs, quotas, and embargoes to protect domestic industries and employment.
An essay is composed of an introduction, body paragraphs, and a conclusion. The introduction contains general statements about the topic and a thesis statement. Body paragraphs each have a topic sentence supporting the thesis and concluding sentence. The conclusion restates the main ideas.
International trade involves the exchange of goods and services between countries. It provides benefits like job creation, increased consumption, and economic growth. However, it also faces problems from trade barriers like tariffs and quotas imposed by governments. International organizations like the World Trade Organization seek to reduce trade barriers and help resolve trade disputes between nations to further global trade.
This document provides tips for writing a successful essay. It recommends choosing an interesting topic you are passionate about and sticking to the scope. The essay should be planned with a clear structure and flow of ideas. The introduction should capture the reader's interest and indicate the overall purpose and structure. The body should develop the main ideas in a logical, persuasive manner using facts and examples. The conclusion should summarize the main points without introducing new ideas and leave the reader with a clear takeaway. Proper reviewing and proofreading is important to create a cohesive, well-written final draft.
The document discusses several theories of international trade:
1. Mercantilism held that a nation's wealth depended on accumulating gold and silver through trade surpluses. It advocated subsidies for exports and tariffs/quotas on imports.
2. Adam Smith's absolute advantage theory argued that countries should specialize in goods they produce most efficiently and trade for other goods. Both countries can benefit through specialization and trade.
3. David Ricardo's comparative advantage theory extended this, showing that trade can benefit both sides even if one country is more efficient overall. Countries should import goods they have a comparative - not absolute - disadvantage in.
4. Later theories examined factors like differences in factor endowments
Mercantilism encouraged exports and discouraged imports to accumulate wealth, usually in gold and silver. Adam Smith argued that free trade and specializing in absolute advantages benefits countries more. Comparative advantage theory extended this by showing even without absolute advantages, all countries gain from trade. Porter's diamond model explains how national competitive advantages arise from factor conditions, demand conditions, related/supporting industries, and firm strategy/rivalry within a country.
The document discusses Special Drawing Rights (SDRs), which were created by the IMF in 1969 as a supplementary international reserve asset to help address shortfalls in preferred reserve assets like gold and the US dollar. SDRs are neither a currency nor a claim on the IMF, but are instead exchangeable for currencies from IMF member countries. The value of an SDR is determined by a basket of currencies and SDRs can be used between countries to supplement foreign exchange reserves. SDRs have played a role as an alternative reserve asset during periods of US dollar weakness or lack of liquidity.
Special drawing rights (SDR) and Optimum currency area (OCA)Piyush Patidar
This document discusses Special Drawing Rights (SDR) and Optimum Currency Areas (OCA). It defines SDR as an international reserve asset created by the IMF in 1969 used for balance of payments settlements. It explains that SDR was created to support the Bretton Woods system and is now valued as a basket of currencies. The document also outlines OCA theory and criteria for an optimal currency region, noting regions with openness, diverse production, mobile labor and homogeneous preferences are more suited for a single currency. It concludes benefits of an OCA include reduced costs and increased trade while costs include constrained monetary and fiscal policies.
The International Monetary Fund (IMF) is an organization of 188 countries that works to foster global monetary cooperation and financial stability. It aims to facilitate international trade, promote employment and economic growth, and reduce poverty. The IMF manages a reserve asset called Special Drawing Rights (SDRs) that can supplement its members' official foreign exchange reserves. SDRs are allocated to IMF members in proportion to their quotas and can be exchanged for freely usable currencies. The value of SDRs is based on a basket of currencies and is recalculated every five years by the IMF.
This document provides information about bond markets. It defines key terms like international bonds, domestic bonds, Eurobonds, and foreign bonds. It discusses the different types of international bonds and how they are classified. It also outlines the common process for issuing bonds and describes some of the main instruments and risks associated with international bond markets. Various data on outstanding bond amounts by major instruments, issuers, currencies is presented. The advantages and disadvantages of international bonds for both companies and investors are summarized.
This document provides an overview of Special Drawing Rights (SDR) including:
1. SDRs were created by the IMF in 1969 as a supplemental international reserve asset to help address limitations of using gold and dollars.
2. The value of an SDR is determined by a basket of 5 currencies - US dollar, Euro, Chinese yuan, Japanese yen, and British pound - and their relative weights are adjusted every 5 years based on trade and reserves.
3. SDRs can be allocated to IMF member countries to supplement their official reserves, with the amount based on their IMF quota share. They can also be used in transactions with the IMF or to represent the value of international financial contracts.
This document provides an outline for a chapter that discusses the determination of exchange rates. It begins by introducing the International Monetary Fund (IMF) and its role in exchange rate policy. It then examines the various exchange rate regimes that countries use, including pegged, floating, and managed floats. It discusses factors that influence exchange rates such as purchasing power parity and interest rates. The chapter also explores how managers can forecast exchange rate movements and how fluctuations impact business decisions.
The document discusses the history and role of the International Monetary Fund (IMF). It was created in 1944 at the Bretton Woods conference to stabilize exchange rates and assist countries with payment imbalances. The IMF provides policy advice, research, loans, and technical assistance to its 188 member countries. The IMF is governed by quotas paid by each member and is led by a Managing Director. It supports global monetary cooperation, balanced trade, exchange rate stability, and helps eliminate payment imbalances and poverty in developing countries.
This document discusses Islamic banking and its role in international financial markets. It provides an overview of Islamic banking in Malaysia, where about 10% of banking transactions are Islamic-based. Globally, Islamic banking assets total around $260 billion, though they account for only 1% of the global banking system. The document also discusses the evolution of international financial markets and their increasing sophistication, concentration, and integration. It notes that Islamic markets have emerged to fill market needs, and that for Islamic finance to grow, it needs to create transparent, fair, and stable markets that satisfy customer needs.
International syndicated loans and regional banksMasaki Yamaguchi
This paper investigates regional bank participation in international syndicated loans, which attract significant attention from the banking industry. This topic has a remarkable importance for regional banks because overseas activities are related to their growth strategies. We pose two questions to illustrate the internationalization of regional banks. The first question explores differences in loan transactions between the first internationalization during 1992-1997 and the second internationalization during 2009-2014. The second question seeks to identify the types of loan transactions preferred by regional banks. We answer these questions by using a comparative analysis and Probit analysis of 23,387 transaction data. Activities of regional banks in the first period overwhelm that of the second period. The first internationalization was characterized by a broad base of participant banks. Estimation results demonstrated similarities in the lending behavior of regional banks between the two periods. Smaller loan amounts, larger syndicates, and loan purposes for ordinary business facilitate regional bank participation in syndicated loans. These preferences reflect limited risk-taking capability and a weaker screening technique by regional banks. We also observe differences in currency denomination, and the Japanese yen increases its presence in the second period.
This document discusses the potential transition from multiple national currencies to a single global currency. It begins by providing context on globalization and the roles of the IMF and World Bank in promoting international cooperation and economic stability. It then outlines proposals for the IMF to use Special Drawing Rights to replace the US dollar as the main global reserve currency. The document also discusses how a single global currency could be implemented and governed by a global central bank. It notes potential benefits like reduced transaction costs but also drawbacks such as limiting individual countries' control over monetary policy. It concludes by suggesting proper regulation and implementation would be needed for a single global currency to help with globalization.
Special Drawing Rights (SDRs) are international reserve assets created by the IMF to supplement member countries' official reserves. SDRs were created in 1969 and allocated to members based on their IMF quotas. The value of SDRs is defined as a basket of currencies including the U.S. dollar, euro, Chinese yuan, Japanese yen, and British pound. Member countries can use SDRs to settle balance of payments deficits and for transactions with the IMF. SDRs also trade in private markets. India's IMF quota and shareholding has increased over time, and it has borrowed SDRs in the past to address balance of payments crises.
The document discusses the main functions of the price mechanism, which are to allocate scarce resources, ration goods when demand exceeds supply, send signals to producers and consumers about market conditions, and provide incentives. It provides examples of how prices change to perform these functions in markets for goods like food, housing, and cotton. The document also examines factors that can cause price volatility, like shifts in supply and demand, and how elasticity influences the impact of these shifts on price and quantity.
International Trade, Comparative Advantage, and ProtectionismNoel Buensuceso
International trade occurs as economies specialize based on comparative advantages. Comparative advantage means a country can produce a good at a lower opportunity cost than other nations. When countries specialize and trade according to their comparative advantages, both nations maximize total output and allocate resources more efficiently. Exchange rates determine the terms of trade between nations by setting the price of one currency in terms of another. A country's factor endowments like resources and labor explain much of world trade patterns as countries specialize in goods that intensively use their abundant, low-cost factors. However, some argue for trade barriers like tariffs, quotas, and subsidies to protect domestic industries, jobs, and national security from foreign competition.
This document provides notes on international trade concepts. It begins with reasons why nations trade, such as lower prices, greater choice, and differences in resources. It then discusses absolute and comparative advantage using an example of an industrialized country trading with a developing country. Key terms like imports, exports, tariffs, and protectionism are defined. Arguments for and against protectionism are outlined. The document concludes with an overview of the history and functions of the World Trade Organization.
Let's face it. At some point of time in our school or college, we face a typically difficult assignment with a tricky problem, a complex equation or a case study on an obscure concept. Do you wish you had access to a qualified tutor who could help you at that moment?
Our homework assistance service, which is available 24/7 in subjects across disciplines like Finance, Accounting, Management, Engineering, Sciences, Math and ELA, is precisely the answer to your wish.
Our tutors provide you with a step-by-step working of the solution to your homework problems so that you understand the solution and the approach better. Aiming for school/college success with top grades just got easier with Online Assignment help
It has been our constant endeavor to match the best tutoring with the most affordable price. Our tutors are highly qualified, have long tutoring experience in their respective subjects and have passed our stringent screening criteria. This makes them some of the best in the tutoring industry.
We are proud to have moved over 100,000 customers closer to their cherished goals. We would be glad to be a part of your journey too.
• Our Homework help covers detailed solutions to Assignment problems, Case studies, Project Work, Research paper writing, Essay writing and review help.
Website: www.onlineassignment.net
Mail: homework@onlineassignment.net
Live Chat Available 24*7
Regards
Online Assignment
The document summarizes David Ricardo's theory of comparative advantage from 1817. It explains that Ricardo formalized the idea that countries can benefit from trade even if one country is more productive in all areas. Ricardo used a numerical example to show that if countries specialize in their comparative advantage goods, where their productivity is relatively higher, then total production can increase. The theory assumes differences in productivity across countries and industries and argues countries should allocate resources to comparative advantage industries to maximize global output through specialization and trade.
International trade occurs between countries due to differences in factors of production and limited mobility between countries. There are three main reasons for international trade: diversity of production conditions between countries, increasing returns to scale, and differences in tastes for goods. International trade has advantages like increased world output, variety of goods and services, and economic growth. However, it also has disadvantages such as economic and political interdependence and depletion of national reserves. Countries employ protectionist policies and trade barriers like tariffs, quotas, and embargoes to protect domestic industries and employment.
An essay is composed of an introduction, body paragraphs, and a conclusion. The introduction contains general statements about the topic and a thesis statement. Body paragraphs each have a topic sentence supporting the thesis and concluding sentence. The conclusion restates the main ideas.
International trade involves the exchange of goods and services between countries. It provides benefits like job creation, increased consumption, and economic growth. However, it also faces problems from trade barriers like tariffs and quotas imposed by governments. International organizations like the World Trade Organization seek to reduce trade barriers and help resolve trade disputes between nations to further global trade.
This document provides tips for writing a successful essay. It recommends choosing an interesting topic you are passionate about and sticking to the scope. The essay should be planned with a clear structure and flow of ideas. The introduction should capture the reader's interest and indicate the overall purpose and structure. The body should develop the main ideas in a logical, persuasive manner using facts and examples. The conclusion should summarize the main points without introducing new ideas and leave the reader with a clear takeaway. Proper reviewing and proofreading is important to create a cohesive, well-written final draft.
The document discusses several theories of international trade:
1. Mercantilism held that a nation's wealth depended on accumulating gold and silver through trade surpluses. It advocated subsidies for exports and tariffs/quotas on imports.
2. Adam Smith's absolute advantage theory argued that countries should specialize in goods they produce most efficiently and trade for other goods. Both countries can benefit through specialization and trade.
3. David Ricardo's comparative advantage theory extended this, showing that trade can benefit both sides even if one country is more efficient overall. Countries should import goods they have a comparative - not absolute - disadvantage in.
4. Later theories examined factors like differences in factor endowments
Mercantilism encouraged exports and discouraged imports to accumulate wealth, usually in gold and silver. Adam Smith argued that free trade and specializing in absolute advantages benefits countries more. Comparative advantage theory extended this by showing even without absolute advantages, all countries gain from trade. Porter's diamond model explains how national competitive advantages arise from factor conditions, demand conditions, related/supporting industries, and firm strategy/rivalry within a country.
The document discusses Special Drawing Rights (SDRs), which were created by the IMF in 1969 as a supplementary international reserve asset to help address shortfalls in preferred reserve assets like gold and the US dollar. SDRs are neither a currency nor a claim on the IMF, but are instead exchangeable for currencies from IMF member countries. The value of an SDR is determined by a basket of currencies and SDRs can be used between countries to supplement foreign exchange reserves. SDRs have played a role as an alternative reserve asset during periods of US dollar weakness or lack of liquidity.
Special drawing rights (SDR) and Optimum currency area (OCA)Piyush Patidar
This document discusses Special Drawing Rights (SDR) and Optimum Currency Areas (OCA). It defines SDR as an international reserve asset created by the IMF in 1969 used for balance of payments settlements. It explains that SDR was created to support the Bretton Woods system and is now valued as a basket of currencies. The document also outlines OCA theory and criteria for an optimal currency region, noting regions with openness, diverse production, mobile labor and homogeneous preferences are more suited for a single currency. It concludes benefits of an OCA include reduced costs and increased trade while costs include constrained monetary and fiscal policies.
The International Monetary Fund (IMF) is an organization of 188 countries that works to foster global monetary cooperation and financial stability. It aims to facilitate international trade, promote employment and economic growth, and reduce poverty. The IMF manages a reserve asset called Special Drawing Rights (SDRs) that can supplement its members' official foreign exchange reserves. SDRs are allocated to IMF members in proportion to their quotas and can be exchanged for freely usable currencies. The value of SDRs is based on a basket of currencies and is recalculated every five years by the IMF.
This document provides information about bond markets. It defines key terms like international bonds, domestic bonds, Eurobonds, and foreign bonds. It discusses the different types of international bonds and how they are classified. It also outlines the common process for issuing bonds and describes some of the main instruments and risks associated with international bond markets. Various data on outstanding bond amounts by major instruments, issuers, currencies is presented. The advantages and disadvantages of international bonds for both companies and investors are summarized.
This document provides an overview of Special Drawing Rights (SDR) including:
1. SDRs were created by the IMF in 1969 as a supplemental international reserve asset to help address limitations of using gold and dollars.
2. The value of an SDR is determined by a basket of 5 currencies - US dollar, Euro, Chinese yuan, Japanese yen, and British pound - and their relative weights are adjusted every 5 years based on trade and reserves.
3. SDRs can be allocated to IMF member countries to supplement their official reserves, with the amount based on their IMF quota share. They can also be used in transactions with the IMF or to represent the value of international financial contracts.
This document provides an outline for a chapter that discusses the determination of exchange rates. It begins by introducing the International Monetary Fund (IMF) and its role in exchange rate policy. It then examines the various exchange rate regimes that countries use, including pegged, floating, and managed floats. It discusses factors that influence exchange rates such as purchasing power parity and interest rates. The chapter also explores how managers can forecast exchange rate movements and how fluctuations impact business decisions.
The document discusses the history and role of the International Monetary Fund (IMF). It was created in 1944 at the Bretton Woods conference to stabilize exchange rates and assist countries with payment imbalances. The IMF provides policy advice, research, loans, and technical assistance to its 188 member countries. The IMF is governed by quotas paid by each member and is led by a Managing Director. It supports global monetary cooperation, balanced trade, exchange rate stability, and helps eliminate payment imbalances and poverty in developing countries.
This document discusses Islamic banking and its role in international financial markets. It provides an overview of Islamic banking in Malaysia, where about 10% of banking transactions are Islamic-based. Globally, Islamic banking assets total around $260 billion, though they account for only 1% of the global banking system. The document also discusses the evolution of international financial markets and their increasing sophistication, concentration, and integration. It notes that Islamic markets have emerged to fill market needs, and that for Islamic finance to grow, it needs to create transparent, fair, and stable markets that satisfy customer needs.
International syndicated loans and regional banksMasaki Yamaguchi
This paper investigates regional bank participation in international syndicated loans, which attract significant attention from the banking industry. This topic has a remarkable importance for regional banks because overseas activities are related to their growth strategies. We pose two questions to illustrate the internationalization of regional banks. The first question explores differences in loan transactions between the first internationalization during 1992-1997 and the second internationalization during 2009-2014. The second question seeks to identify the types of loan transactions preferred by regional banks. We answer these questions by using a comparative analysis and Probit analysis of 23,387 transaction data. Activities of regional banks in the first period overwhelm that of the second period. The first internationalization was characterized by a broad base of participant banks. Estimation results demonstrated similarities in the lending behavior of regional banks between the two periods. Smaller loan amounts, larger syndicates, and loan purposes for ordinary business facilitate regional bank participation in syndicated loans. These preferences reflect limited risk-taking capability and a weaker screening technique by regional banks. We also observe differences in currency denomination, and the Japanese yen increases its presence in the second period.
This document discusses the potential transition from multiple national currencies to a single global currency. It begins by providing context on globalization and the roles of the IMF and World Bank in promoting international cooperation and economic stability. It then outlines proposals for the IMF to use Special Drawing Rights to replace the US dollar as the main global reserve currency. The document also discusses how a single global currency could be implemented and governed by a global central bank. It notes potential benefits like reduced transaction costs but also drawbacks such as limiting individual countries' control over monetary policy. It concludes by suggesting proper regulation and implementation would be needed for a single global currency to help with globalization.
Special Drawing Rights (SDRs) are international reserve assets created by the IMF to supplement member countries' official reserves. SDRs were created in 1969 and allocated to members based on their IMF quotas. The value of SDRs is defined as a basket of currencies including the U.S. dollar, euro, Chinese yuan, Japanese yen, and British pound. Member countries can use SDRs to settle balance of payments deficits and for transactions with the IMF. SDRs also trade in private markets. India's IMF quota and shareholding has increased over time, and it has borrowed SDRs in the past to address balance of payments crises.
Abstract: Until middle of 2007, yen carry trade was one of the lucrative options to the traders. Not only American dollar (USD) was high in terms of Japanese yen (JPY) during that time (June 18, 2007, 1 USD = 123.87 JPY) (see Fig 1), but significant differences of interest rates between US treasury and borrowing rate of Japan prompted traders to borrow Japanese currency with a relatively low interest rate and to use the funds to purchase a different currency (i.e. USD) yielding higher interest rate in order to make a significant amount of profit depending on the amount of leverage used. However, afterwards constant appreciation of JPY in terms of USD (December 4, 2009, 1 USD = 87.8 JYP) and reduction of US deposit interest rate has changed the scenario completely. As USD is depreciated in terms of other major currencies (Euro, Great Britain Pound etc.) in 2009 and deposit interest rate in some country (i.e Australia) is still higher than the borrowing rate of USA, traders now are encouraged in going for dollar carry trade instead of yen carry trade. This aspect is described at length in this report with the help of an excel based carry trade software named ‘samcarry’ (see appendix), which is developed by the author. Though major world currencies (Australian dollar, Euro, Japanese yen, Great Britain pound, American dollar) are used to make a comparison to understand which currency is beneficial for carry trade, Indian currency, rupees (INR) is also considered for this purpose.
The document provides information about Special Drawing Rights (SDRs) created by the International Monetary Fund. It discusses that SDRs were created in 1969 as a supplemental international reserve asset intended to supplement a shortfall of gold and US dollars. The value of an SDR is defined by a weighted basket of currencies including the US dollar, Euro, British pound, and Japanese yen. SDRs are allocated to IMF members based on their IMF quota and can only be exchanged between central banks for freely usable currencies.
The foreign exchange market allows for the simultaneous transaction of one currency for another. The value of a currency is expressed relative to another currency through an exchange rate. Common determinants of exchange rates include international parity conditions, a country's balance of payments, economic factors, and political conditions. Major participants in the forex market include banks, central banks, commercial companies, investment firms, and retail brokers. Common financial instruments traded include spots, forwards, futures, swaps, and options. The United States dollar is the most heavily traded currency.
This document provides an overview of international financial markets, with a focus on foreign exchange markets. It defines key terms related to exchange rates and exchange rate regimes. It discusses the history of exchange rate regimes from the gold standard to today's mixed system. It also summarizes characteristics of today's foreign exchange market, how currency quotes work, sources of exchange rate volatility, and implications for international investors.
SDRs are international reserve assets created by the IMF to supplement the official reserves of its members. They can be exchanged for freely usable currencies. The value of SDRs is determined by a basket of currencies and is used by IMF members engaging in transactions and for determining interest rates on SDR holdings. While SDRs help improve international liquidity and stability without reliance on gold, some criticize their inequitable distribution and failure to meet liquidity needs or promote development.
The document discusses the balance of payments (BOP), which tracks all international monetary transactions into and out of a country. The BOP is divided into the current account, capital account, and financial account. The current account covers trade in goods, services, and investment income. The capital account covers financial transfers like foreign direct investment. The financial account records international investment flows. The document also discusses the gold standard, special drawing rights (SDR), the Bretton Woods system, and international liquidity.
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Financial Assets: Debit vs Equity Securities.pptxWrito-Finance
financial assets represent claim for future benefit or cash. Financial assets are formed by establishing contracts between participants. These financial assets are used for collection of huge amounts of money for business purposes.
Two major Types: Debt Securities and Equity Securities.
Debt Securities are Also known as fixed-income securities or instruments. The type of assets is formed by establishing contracts between investor and issuer of the asset.
• The first type of Debit securities is BONDS. Bonds are issued by corporations and government (both local and national government).
• The second important type of Debit security is NOTES. Apart from similarities associated with notes and bonds, notes have shorter term maturity.
• The 3rd important type of Debit security is TRESURY BILLS. These securities have short-term ranging from three months, six months, and one year. Issuer of such securities are governments.
• Above discussed debit securities are mostly issued by governments and corporations. CERTIFICATE OF DEPOSITS CDs are issued by Banks and Financial Institutions. Risk factor associated with CDs gets reduced when issued by reputable institutions or Banks.
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Common Stock: These are simple equity securities and bear no complexities which the preferred stock bears. Holders of such securities or instrument have the voting rights when it comes to select the company’s board of director or the business decisions to be made.
Preferred Stock: Preferred stocks are sometime referred to as hybrid securities, because it contains elements of both debit security and equity security. Preferred stock confers ownership rights to security holder that is why it is equity instrument
<a href="https://www.writofinance.com/equity-securities-features-types-risk/" >Equity securities </a> as a whole is used for capital funding for companies. Companies have multiple expenses to cover. Potential growth of company is required in competitive market. So, these securities are used for capital generation, and then uses it for company’s growth.
Concluding remarks
Both are employed in business. Businesses are often established through debit securities, then what is the need for equity securities. Companies have to cover multiple expenses and expansion of business. They can also use equity instruments for repayment of debits. So, there are multiple uses for securities. As an investor, you need tools for analysis. Investment decisions are made by carefully analyzing the market. For better analysis of the stock market, investors often employ financial analysis of companies.
1. Theories of international trade
• theory of mercantilism
• theory of absolute advantage
• theory of comparative advantage
• factor endowment theory
• theory of international product life cycle
• theory of competitive advantage
EPRG concept
• ethnocentric orientation
• polycentric orientation
• regiocentric orientation
• geocentric orientation
• Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS)
Adp
Special Drawing Right (SDR)
Emic vs. Etic dilemma
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Special Drawing Rights
From Wikipedia, the free encyclopedia
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The Special Drawing Right (SDR) is a monetary unit of international reserve assets defined and
maintained by the International Monetary Fund (IMF). The unit does not represent a currency,
but represents a potential claim on the currencies of the IMF members for which it may be
exchanged.[1] Allocations of Special Drawing Rights to IMF members are backed by a fund
pooled by contributing nations, and they obtain their reserve asset power from the commitments
of the IMF member states to hold and honor them for payment of balances.
Special Drawing Rights were created in 1969 in support of the Bretton Woods system of fixed
exchange rates to alleviate the shortage of U.S. dollar and gold reserves in the expansion of
international trade.[1] The SDR is defined as a weighted sum of contributions of four major
currencies, the euro, the US dollar, the British pound, and the Japanese yen, and is reevaluated
and adjusted every five years, and computed daily in terms of equivalent United States dollars.
The IMF uses SDRs for its monetary unit of account. SDRs are denoted with the ISO 4217
currency code XDR.
Special Drawing Rights are allocated to member states as a low cost alternative to debt financing
for building reserves. Such allocations provide an unconditional liquidity for SDRs. As of
September 2009, total SDR allocations amount to SDR 204 billion.[1] Special Drawing Rights
carry an interest rate that is computed weekly by the IMF. It is paid or received quarterly by the
members for deviations of their SDR holdings from their SDR allocations.
Contents
[hide]
• 1 Creation and function
• 2 Definition
• 3 Interest rate
• 4 Allocations
• 5 Exchange
• 6 Other uses
o 6.1 Banking and finance system support
o 6.2 Reserve currency proposal
• 7 Potential pitfalls as a reserve currency
• 8 See also
• 9 References
• 10 External links
[edit] Creation and function
3. Special Drawing Rights were created by the IMF in 1969, intended to be an asset held in foreign
exchange reserves under the Bretton Woods system of fixed exchange rates.
SDRs were intended to replace gold and silver in large international transactions and provide a
cost-free alternative to member states for building reserves. Under the Bretton Woods system,
the reserves of gold and U.S. dollars proved too limited to support the growth of international
trade and exchange. Thus, SDRs were initially credits that nations with balance of trade
surpluses can draw upon from nations with deficits. However, the creators of the new reserve
asset engaged in long-standing disagreements over the role of this asset, whether it was a form of
money (paper gold) or credit.[2] This resulted in the naming of the asset in a neutral, anodyne
manner. Member nations receiving SDR allocations were expected by the reconstitution
provision of the SDR articles to hold or, if expended, rebuild their SDR allocations. Therefore,
the SDR had initially the character of credit or a debt security. However, as the reconstitution
provisions were dropped in 1981, the function of the SDR assumed the character of money.[2]
As the SDR is used as a unit of account by the IMF and several other international organizations,
it is sometimes referred to as a quasi currency.[3]
A few countries peg their currencies against SDRs, and it is also used to denominate some
private international financial instruments. For example, the Warsaw convention, which
regulates liability for international carriage of persons, luggage or goods by air, uses SDRs to
value the maximum liability of the carrier.
In the eurozone, the euro is displacing the SDR as a basis to set values of various currencies,
including Latvian lats. This is a result of the ERM II convergence criteria which now apply to
states entering the European Union.
In Japan, JETRO and others are using the SDR to calculate official development assistance
(ODA) aid.
After the collapse of the Bretton Woods system in the early 1970s, the SDRs has taken on a far
less important role.[4]
The SDR was suggested as a solution to the Triffin dilemma,[2] which showed a dichotomy
between sufficient market liquidity and confidence in the continuing value of the US dollar.[2]
The SDR would be an asset that had sufficient liquidity to support a workable foreign exchange
reserves system.[citation needed]
The Triffin dilemma suggested that a well-functioning system would require liquidity, and
liquidity would demand many US dollars--the US was the world's reserve center in 1960, the
time of Triffin's analysis--and the deficit necessary for there to be many dollars.[2] This deficit
would eventually devalue the dollar,[2] and in fact prior to the early 1970s the US was reluctant to
run such a deficit.[5]
[edit] Definition
4. In 1969 one SDR was initially defined as having a value of 0.888671grams of gold, the value of
one US dollar at that time.[1] After the breakdown of the Bretton Woods system in the early
1970s, the SDR was redefined in terms of a basket of currencies.[5][6] Today, this basket is
composed of the Japanese yen, the US dollar, the British pound and the euro. Upon the
introduction of the euro in 1999, it replaced the Deutsche mark and the French franc in the SDR
valuation. The weight of each currency in the definition is determined by the IMF Executive
Board in accordance with the relative importance of the currency in international trade and
finance every five years.[1] Special Drawing Rights are assigned the ISO 4217 currency code
XDR.
For the period of 2006-2010, one SDR was the sum of 0.6320 US Dollars, 0.4100 euro, 18.4
Japanese yen and 0.0903 pound sterling. Effective 1 January 2011, the IMF has determined that
the four currencies that meet the selection criterion for inclusion in the SDR valuation basket will
be assigned revised weights based on their roles in international trade and reserves.[7]
Due to varying exchange rates, the relative value of each currency varies continuously and thus
the SDR value fluctuates. The IMF fixes the value of one SDR in terms of US dollars daily,
based on the exchange rates of the constituent currencies, as quoted at noon at the London
market. If the London market is closed, New York market rates are used, and if both markets are
closed, European Central Bank reference rates are used. The latest U.S. dollar valuation of the
SDR is published on the International Monetary Fund web site.[8]
Composition of 1 SDR[9][nb 1]
Period USD DEM FRF JPY GBP
1981– 0.460 0.740 0.0710
0.540 (42%) 34.0 (13%)
1985 (19%) (13%) (13%)
1986– 0.527 1.020 0.0893
0.452 (42%) 33.4 (15%)
1990 (19%) (12%) (12%)
1991– 0.453 0.800 0.0812
0.572 (40%) 31.8 (17%)
1995 (21%) (11%) (11%)
1996– 0.446 0.813 0.1050
0.582 (39%) 27.2 (18%)
1998 (21%) (11%) (11%)
Period USD EUR JPY GBP
0.2280 0.1239
1999– 0.5820 (21%) (11%) 0.1050
27.2 (18%)
2000 (39%) (11%)
= 0.3519 (32%)[10]
2001– 0.5770 0.0984
0.4260 (29%) 21.0 (15%)
2005 (45%) (11%)
5. 2006– 0.6320 0.0903
0.4100 (34%) 18.4 (11%)
2010 (44%) (11%)
0.6600 12.1000 0.1110
2011–[7] 0.4230 (37.4%)
(41.9%) (9.4%) (11.3%)
1. ^ relative compositions expressed in per cent are rounded.
[edit] Interest rate
Special Drawing Rights carry a weekly determined interest rate.[1] The rate is based on a
weighted average of the representative short-term rates in the money markets of the base
currencies. The SDR interest rate is paid by the IMF members on any shortfall of SDR
subscriptions below their cost-free allocation, and on non-concessional IMF loans. The IMF pays
its members the interest rate on the fraction of their SDR subscriptions that is above their
allocation quota.[1]
[edit] Allocations
Special Drawing Rights are allocated to member nations by the IMF. A nation's IMF quota, the
maximum amount of financial resources that it is obligated to contribute to the fund, determines
its allotment of SDRs.[1] SDR allocations are officially authorized by the G-20 conferences.[1]
Allocations are not made on a regular basis and have only occurred on several occasions. They
began in 1970 in yearly installments, creating an initial pool of SDR 9.3 billion by 1972. This
first round took place due to the possibility of an insufficient amount of US Dollars, as the US
was reluctant to run the deficit necessary to supply future demand.[2]
While this situation was soon reversed,[5] the situation of the dollar during the late 1970s led to
another round of allocations from 1979 to 1981 allocation.[11] This second series of installments
brought the total to 21.4 billion by 1981. Since then, up to the 2008 banking crisis, no new
allocations took place. On 2 April 2009, the G-20 authorized the issuance of $250 billion in new
SDRs to augment the foreign reserves of IMF members and quickly channel resources into
emerging economies.[12] Increases in the reserves of some emerging economies will be
substantial, e.g., South Korea’s will grow by $3.4 billion, India’s by $4.8 billion, Brazil’s by $3.5
billion, Russia’s by $6.9 billion and China's by $7.3 billion.[13]
Date Amount
1970-1972[5] SDR 9.3 billion
1979–1981 SDR 12.1 billion
April 2, 2009[14] SDR 250 billion
6. September 9, 2009[sa 1] SDR 21.4 billion
1. ^ A special allocation of SDRs was issued on Sep. 9, 2009, to nations that joined the IMF after
1981 and so had never been allocated any.[14]
[edit] Exchange
The IMF acts as an intermediary in the voluntary trading of Special Drawing Rights[1] and has the
authority to order nations with strong foreign exchange reserves to purchase SDRs from nations
with weak reserves.[1] But the claim to foreign currency that SDRs represent is not a claim on the
IMF,[1] and it is not the IMF that pays out foreign currency in exchange for SDR.
[edit] Other uses
SDR are used as the unit of account for the IMF and several other international organizations,[1]
such as JETRO and the Universal Postal Union.[citation needed]
SDR-denominated accounts are, in general, not available from commercial banks.
In some international treaties and agreements, SDR are used to value penalties, charges or prices,
as is the case with the Convention on Limitation of Liability for Maritime Claims, where
personal liability for damages to ships are capped at SDR 330,000.[15] The Warsaw convention,
the Montreal Convention and other treaties also use SDRs in this way.[citation needed]
A few countries peg their currencies to the SDR.[16]
It has been suggested that having holders of US dollars convert dollars into SDRs would allow
diversification away from the dollar without accelerating the decline of the value of the dollar.[17]
[18]
[edit] Banking and finance system support
The African Development Bank's own unit of account, the Units of Amount (UA), equals the
SDR currency basket. The Islamic Development Bank (IsDB), uses the Islamic Dinar (ID) as a
currency. Since the inception of the IsDB, one ID has been set equal to one SDR.
[edit] Reserve currency proposal
In late March 2009 Zhou Xiaochuan, governor of the People's Bank of China proposed using the
SDR as a worldwide reserve currency in place of the dollar as a way to cope with the multitude
of problems associated with the US dollar and the euro being used as world reserve currencies.[19]
[20][21][22]
However, independent economists point out that the SDR is unlikely to emerge as an
alternative reserve currency in the foreseeable future.[23] A few of them argue that China's
proposal may be motivated by political, rather than economic, considerations.[24]
7. [edit] Potential pitfalls as a reserve currency
There are potential pitfalls that may preclude the SDR from being a global reserve currency. The
US dollar, the euro and the pound sterling are contained in the SDR—these currencies have been
losing value against a larger basket of other currencies since the late 2000s recession started in
2007. The SDR does not contain the Chinese yuan, Indian rupee, Australian dollar or Canadian
dollar, which have important international status being widely held. No facilities exist for global
SDR banking support for individuals and businesses. The possible loss of national sovereignty of
the nations involved is a concern.[25]
Other important externalities have been occasionally cited by economists.[citation needed] China &
India's precious metal foreign exchange reserve holdings are not equivalent in size to those of the
US with respect to SDR conversion. The gulf states have precious metal reserves that are
potentially undersized. Many other nations that could move over to the SDR also have too small
precious metal foreign exchange reserve assets.
Special Drawing Rights (SDRs)
March 31, 2011
The SDR is an international reserve asset, created by the IMF in 1969 to supplement its member
countries' official reserves. Its value is based on a basket of four key international currencies,
and SDRs can be exchanged for freely usable currencies. With a general SDR allocation that
took effect on August 28 and a special allocation on September 9, 2009, the amount of SDRs
increased from SDR 21.4 billion to SDR 204 billion (equivalent to about $324.1 billion,
converted using the rate of March 31, 2011).
The role of the SDR
The SDR was created by the IMF in 1969 to support the Bretton Woods fixed exchange rate
system. A country participating in this system needed official reserves—government or central
bank holdings of gold and widely accepted foreign currencies—that could be used to purchase
the domestic currency in foreign exchange markets, as required to maintain its exchange rate.
But the international supply of two key reserve assets—gold and the U.S. dollar—proved
inadequate for supporting the expansion of world trade and financial development that was
taking place. Therefore, the international community decided to create a new international
reserve asset under the auspices of the IMF.
However, only a few years later, the Bretton Woods system collapsed and the major currencies
shifted to a floating exchange rate regime. In addition, the growth in international capital markets
8. facilitated borrowing by creditworthy governments. Both of these developments lessened the
need for SDRs.
The SDR is neither a currency, nor a claim on the IMF. Rather, it is a potential claim on the
freely usable currencies of IMF members. Holders of SDRs can obtain these currencies in
exchange for their SDRs in two ways: first, through the arrangement of voluntary exchanges
between members; and second, by the IMF designating members with strong external positions
to purchase SDRs from members with weak external positions. In addition to its role as a
supplementary reserve asset, the SDR, serves as theunit of account of the IMF and some other
international organizations.
Basket of currencies determines the value of the SDR
The value of the SDR was initially defined as equivalent to 0.888671 grams of fine gold—which,
at the time, was also equivalent to one U.S. dollar. After the collapse of the Bretton Woods
system in 1973, however, the SDR was redefined as a basket of currencies,today consisting of
the euro, Japanese yen, pound sterling, and U.S. dollar. The U.S. dollar-equivalent of the SDR is
posted dailyon the IMF’s website. It is calculated as the sum of specific amounts of the four
basket currencies valued in U.S. dollars, on the basis of exchange rates quoted at noon each day
in the London market.
The basket composition is reviewed every five years by the Executive Board, or earlier if the
Fund finds changed circumstances warrant an earlier review, to ensure that it reflects the relative
importance of currencies in the world’s trading and financial systems. In the most recent review
(in November 2010), the weights of the currencies in the SDR basket were revised based on the
value of the exports of goods and services and the amount of reserves denominated in the
respective currencies that were held by other members of the IMF. These changes become
effective on January 1, 2011. The next review will take place by 2015.
The SDR interest rate
The SDR interest rate provides the basis for calculating the interest charged to members on
regular (non-concessional) IMF loans, the interest paid to members on their SDR holdings and
charged on their SDR allocation, and the interest paid to members on a portion of their quota
subscriptions. The SDR interest rate is determined weekly and is based on a weighted average of
representative interest rates on short-term debt in the money markets of the SDR basket
currencies.
SDR allocations to IMF members
Under its Articles of Agreement (Article XV, Section 1, and Article XVIII), the IMF may
allocate SDRs to member countries in proportion to their IMF quotas. Such an allocation
provides each member with a costless, unconditional international reserve asset on which interest
is neither earned nor paid. However, if a member's SDR holdings rise above its allocation, it
earns interest on the excess. Conversely, if it holds fewer SDRs than allocated, it pays interest on
9. the shortfall. The Articles of Agreement also allow for cancellations of SDRs, but this provision
has never been used. The IMF cannot allocate SDRs to itself or to other prescribed holders.
General allocations of SDRs have to be based on a long-term global need to supplement
existing reserve assets. Decisions on general allocations are made for successive basic periods of
up to five years, although general SDR allocations have been made only three times. The first
allocation was for a total amount of SDR 9.3 billion, distributed in 1970-72, and the second
allocated SDR 12.1 billion, distributed in 1979-81. These two allocations resulted in cumulative
SDR allocations of SDR 21.4 billion.
To help mitigate the effects of the financial crisis, the third SDR allocation of SDR 161.2 billion
was made on August 28, 2009The Fourth Amendment to the Articles of Agreement became
effective August 10, 2009 and was implemented September 9, 2009. It provided for a special
one-time allocation of SDRs and doubled cumulative SDR allocations to SDR 42.8 billion. The
2009 general and special SDR allocations together raised total cumulative SDR allocations to
about SDR 204 billion. The purpose of the Fourth Amendment was to enable all members of the
IMF to participate in the SDR system on an equitable basis and correct for the fact that countries
that joined the IMF after 1981—more than one fifth of the current IMF membership—never
received an SDR allocation until 2009.
Buying and selling SDRs
IMF members often need to buy SDRs to discharge obligations to the IMF, or they may wish to
sell SDRs in order to adjust the composition of their reserves. The IMF may act as an
intermediary between members and prescribed holders to ensure that SDRs can be exchanged for
freely usable currencies. For more than two decades, the SDR market has functioned through
voluntary trading arrangements. Under these arrangements a number of members and one
prescribed holder have volunteered to buy or sell SDRs within limits defined by their respective
arrangements. Following the 2009 SDR allocations, the number and size of the voluntary
arrangements has been expanded to ensure continued liquidity of the voluntary SDR market. The
number of voluntary SDR trading arrangements now stands at 32, including 19 new
arrangements since the 2009 SDR allocations.
In the event that there is insufficient capacity under the voluntary trading arrangements, the Fund
can activate the designation mechanism. Under this mechanism, members with sufficiently
strong external positions are designated by the Fund to buy SDRs with freely usable currencies
up to certain amounts from members with weak external positions. This arrangement serves as a
backstop to guarantee the liquidity and the reserve asset character of the SDR.
SDR Interest Rate Calculation
10. For the week of April 11, 2011 to April 17, 2011
Currency
Currency amount
under Rule O-1
(A)
Exchange rate
against the SDR 1
(B)
Interest rate 2
(C)
Product
(A) x (B) x (C)
Euro
0.4230
0.904167
1.0555
0.4037
Japanese Yen
12.1000
0.00737519
0.1100
0.0098
11. Notes:
(1) SDR per currency rates are based on the representative exchange rate for each currency.
(2) Interest rate on the financial instrument of each component currency in the SDR basket,
expressed as an equivalent annual bond yield: three-month Eurepo rate; three-month
Japanese Treasury Discount bills (effective February 5, 2009, replacing the thirteen-week
Japanese Government financing bills); three-month UK Treasury bills; and three-month US
Treasury bills.
(3) IMF Rule T-1(b) specifies that the SDR interest rate for each weekly period commencing each
Monday shall be equal to the combined market interest rate as determined by the Fund.
Under IMF Rule T-1(c), the combined market interest rate is the sum, as of the Friday
preceding each weekly period, rounded to the two nearest decimal places, of the products
that result from multiplying each yield or rate listed above by the value in terms of SDRs of the
amount of the corresponding currency specified in Rule O-1. If a yield or rate is not available
for a particular Friday, the calculation shall be made on the basis of the latest available yield or
rate.
Prepared by the IMF Finance Department
Disclaimer
The International Monetary Fund makes no warranties, express or implied, regarding these tables
or the performance of this site. The Fund shall not be liable for any losses or damages incurred in
connection with this site.
SDR Valuation
The currency value of the SDR is determined by summing the values in U.S. dollars, based
on market exchange rates, of a basket of major currencies (the U.S. dollar, Euro, Japanese
yen, and pound sterling). The SDR currency value is calculated daily (except on IMF
holidays or whenever the IMF is closed for business) and the valuation basket is reviewed
and adjusted every five years.
Currency Amounts in New Special Drawing Rights (SDR) Basket
Wednesday, April 13, 2011
Currency Currency amount Exchange rate 1 U.S. dollar Percent change in
under Rule O-1 equivalent exchange rate against
U.S. dollar from previous
12. calculation
Euro 0.4230 1.45080 0.613688 0.311
Japanese yen 12.1000 84.06000 0.143945 0.262
Pound sterling 0.1110 1.62710 0.180608 0.055
U.S. dollar 0.6600 1.00000 0.660000
1.598241
U.S.$1.00 = SDR 0.625688 2 -0.149 3
SDR1 = US$ 1.59824 4
Notes:
(1) The exchange rate for the Japanese yen is expressed in terms of currency units per U.S. dollar;
other rates are expressed as U.S. dollars per currency unit.
(2) IMF Rule O-2(a) defines the value of the U.S. dollar in terms of the SDR as the reciprocal of the
sum of the equivalents in U.S. dollars of the amounts of the currencies in the SDR basket,
rounded to six significant digits. Each U.S. dollar equivalent is calculated on the basis of the
middle rate between the buying and selling exchange rates at noon in the London market. If
the exchange rate for any currency cannot be obtained from the London Market, the rate shall
be the middle rate between the buying and selling exchange rates at noon in the New York
market or, if not available there, the rate shall be determined on the basis of euro reference
rates published by the European Central Bank.
(3) Percent change in value of one U.S. dollar in terms of SDRs from previous calculation.
(4) The reciprocal of the value of the U.S dollar in terms of the SDR, rounded to six significant
digits.
Prepared by the IMF Finance Department
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