Reserve Accumulation.pdf

The International Monetary Fund (IMF) has prepared a report on reserve accumulation and international monetary stability. The report, approved by Reza Moghadam on April 13, 2010, discusses the causes and effects of reserve accumulation, its negative impact, and alternative views. The key points are:

Reserve accumulation is a symptom of imperfections in the system, with a sharp buildup of international reserves and concentration in a few reserve currencies.
The current system faces challenges, including high reserve demand and narrow reserve supply, which may lead to substantial challenges for the system.
The report puts forward ideas to address these issues, including mitigating the demand for reserves, diversifying the supply of reserve assets, and promoting voluntary collaboration among members.
The objective is to gauge members' perceptions of the seriousness of imperfections in the current system and the costs and benefits of various solutions.

The report is divided into five sections:

1. Introduction: Discusses the issue of reserve accumulation and the need to review the structure of the international monetary system (IMS).
2. Reserve Accumulation: Causes and Effects: Examines the causes and effects of reserve accumulation, including its negative impact and alternative views.
3. Mitigating the Demand for Reserves: Discusses ways to mitigate the demand for reserves, including precautionary reserves adequacy, reducing underlying volatility, and reducing non-precautionary accumulation of reserves.
4. Diversifying the Supply of Reserve Assets: Explores ways to diversify the supply of reserve assets, including the scope and feasibility of a multi-polar system, supranational reserve assets, and the composition of the SDR basket.
5. Conclusion and Issues for Discussion: Summarizes the key points and issues for discussion, including the need for policy collaboration to address the imperfections in the current system.

The report includes several figures and boxes, including:

Figure 1: Ideas to Mitigate Demand and Diversify Supply of Reserves for IMS Stability
Figure 2: Global Reserves
Figure 3: Annual Change in Capital Flows, Selected EMEs
Figure 4: The Dollar in the World
Box II.1: Reserve Accumulation from 2000-2010 and Beyond
Box II.2: The Dollar as a Store of Value: A Summary of Views
Box IV.1: Systemic Exchange Rate Arrangements
Box IV.2: EM Assets as Substitutes for Reserves?
Box IV.3: Substitution Account
Box IV.4: Composition of the SDR Basket

The report was prepared by a team comprising R. Duttagupta, R. Goyal, P. Khandelwal, I. Mateos y Lago, A. Piris, and N. Raman, with substantive contributions from other departments and inputs from various experts.