The dollar has been the cornerstone of the international monetary system since the Second World War. It is the most important reserve currency, accounting for at least two-thirds of reserve assets, according to the IMF’s Composition of Foreign Exchange Reserves database. Among central banks that do not report this information to the IMF, it is estimated (e.g. by Brad Setser) that 70 percent is held in dollar assets.
The bulk of foreign exchange transactions involve dollars, and significantly more trade gets settled in dollars than involves the United States. Goldberg […]
Once upon a time, those tracking international reserves focused on simple measures of reserve adequacy—enough to cover, say, 3 months of imports or all of the external debt maturing over the next year. However, the relevance of such yardsticks evaporated as a number of countries accumulated reserves that far surpass such levels, partly in reaction to emerging market financial crises of the 1990s and early part of this decade. Brazil’s reserves now exceed $200 billion, while Russia’s are more than $400 billion—and even these numbers are dwarfed by China’s reserves, which […]
In my last post, I explained how the IMF has dramatically scaled up its concessional financial assistance to its low-income country members to help them cope with the current global financial crisis.
Today, I want to get beyond how much is being lent, and turn to the how. It’s not enough simply to push out money—vital though that is. We also need to meet the particular needs of the country in question, and these are quite varied. Precisely with this in mind, the IMF has been changing the way it lends to low-income countries. […]
One of the great tragedies of the present crisis is that it nipped in the bud the longest and most broadly based economic expansion that low-income countries have seen in modern history. These countries were finally reaping the rewards of difficult reforms that go back to the 1980s and 1990s, helped by debt relief and other support. The results were plain to see. During 2000-07, low-income country growth was twice as high as in the previous decade, and inflation fell to single digits. As a result, these countries were finally starting to make inroads […]