ABSTRACT

The introduction in 1969 of the special drawing right (SDR), the reserve asset issued by the International Monetary Fund, was prompted by the desire to establish a mechanism for the deliberate creation of international reserves that would supplement existing reserve assets. In the 1960s these assets were mainly in the form of U.S. dollars, the supplies of which were constrained by the Bretton Woods system of fixed exchange rates, and of gold. The SDR was seen as a way out of the so-called Triffin dilemma whereby additions to official dollar holdings were seen as undermining the stability of the system, given the tendency on the part of some central banks to convert their dollar reserves into gold, thereby drawing down the limited U.S. gold stock.