Credit facilities or reserve allotments?

Abstract

In the international discussions on a contingency plan for the creation of “international liquidity”, the most controversial question has been whether extension of credit facilities or deliberate creation and distribution of reserve units would be the better solution. While some of the experts are indifferent, others are zealous partisans of one of the proposed alternatives. However, most seem willing to accept the proposal which is likely to gain unanimous consent. What is more, changes in the official positions of the participating governments have been frequent and drastic. The present article provides a detailed analysis of the debate of credit facilities vs reserve allotments, highlighting the key related issues. It is argued that the best performance with regard to non-discrimination - the credit facilities approach - would be associated with the worst performance regarding permanence in the existence of monetary reserves, required for a steady growth in world trade and production. 

JEL: F33, F34