Explain how special drawing right (SDR) are constructed. Also discuss the circumstances under which SDR was...

Explain how special drawing right (SDR) are constructed. Also discuss the circumstances under which SDR was created.

Thanks.

Expert Solution

In the year 1969, Special drawing rights (SDR) is the international monetary reserve currency created/constructed by the "International Monetary Fund" (IMF), which is operated with-in the existing reserves of IMF member countries. As there exists a limitations of the gold and dollars as the only means of settling international accounts, SDRs has been raised as international liquidity towards the settlement of international and a standard reserve currencies. SDR is a artificial international exchange currency.

Under the SDR system, every participating country is required to have official reserves. The reserves account so created with the country's central bank or government, the SDR would be purchased alongwith the gold and other globally accepted foreign currencies and which could be used for foreign exchanges and settlement of the accounts with other countries.

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jeff jeffy answered 2 years ago

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