International Monetary Fund. Finance Dept., International Monetary Fund. Legal Dept., and International Monetary Fund. Strategy, Policy, & Review Department
This paper provides the basis for the quinquennial review by the Executive Board of the method of valuation of the Special Drawing Right (SDR). The review covers the composition and weighting of the SDR currency basket, and the financial instruments used to determine the SDR interest rate. In the five-year period for this review (2017‒21), developments in key variables relevant for the SDR valuation suggest that there have been no major changes in the roles of currencies in the world economy. The countries and the currency union (euro area) whose currencies are currently included in the SDR basket remain the five largest exporters and their currencies continue to account for the majority of international financial transactions. Moreover, staff analysis finds that the COVID-19 pandemic and recent fintech developments have no systematic or material impact on the SDR valuation. The paper proposes to maintain the current composition of the SDR currency and interest rate baskets, as well as the method for determining the currency weights and currency amounts in the basket. In line with the Board-approved methodology, the paper proposes updated weights for the currencies in the SDR basket. These maintain the same ranking of the initial weights set in the 2015 review, with slightly higher weights for the U.S. dollar and the Chinese renminbi and, accordingly, somewhat lower weights for the British pound, the euro, and the Japanese yen. The paper also proposes to make explicit the treatment of data gaps in the SDR valuation framework. Findings from a survey of SDR department participants and prescribed holders are used to follow up on operational issues raised in earlier valuation reviews. The new SDR valuation and interest rate baskets are proposed to come into effect on August 1, 2022 for a period of five years.
consider whether the Chinese renminbi meets the full criterion for inclusion, in particular, the freely usable currency requirement. As discussed in more detail in Section IV.B , the available indicators suggest the Chinese renminbi is not yet widely used in international transactions or widely traded in the principal exchange markets, and would thus not appear to meet the criteria for being
determined by the Fund to be a freely usable currency at this time. Accordingly, no change in SDR basketcomposition is proposed at this review.
20. Given the on-going changes
This paper investigates the determinants of sustained accelerations in goods and services exports. Strong predictors of export takeoffs include domestic and structural indicators such as lower macroeconomic uncertainty, improved quality of institutions, a depreciated exchange rate, and agricultural reforms. Lower tariffs, participation in global value chains and diversification also contribute to initiating export accelerations. The paper also finds heterogeneity, with somewhat different triggers for Latin America and the Caribbean, as well as for goods and services. Finally, despite the lack of a robust effect on output, export surges tend to be associated with lower post-acceleration unemployment and income inequality.
2 See Review of the Method of Valuation of the SDR—Initial Considerations (7/16/15).
3 The term “SDR user” refers to both the participants and prescribed holders in the SDR Department regarding their use of official SDRs, and to the use by third parties of the SDR as a unit of account or other reference, for example, deposits denominated in SDR or investment products based on the SDR basketcomposition.
Financial Instruments in the SDR Interest Rate Basket
A. The SDR Interest Rate Basket
B. Financial Instruments and Reference Rates
V. Selection and Weighting of Currencies in the SDR Basket for 2006–10
A. SDR Currency BasketComposition
B. Currency Weights and Rounding of Relative Weights
C. Currency Amounts
D. Transition to a New SDR Basket
VI. Inclusion of Supplementary Financial Variables in SDR Valuation
VII. Timing of the Next Review of the Valuation of the SDR.
1. Exchange Rate Volatility
2. Exports of Goods, Services, and