ECONOMIC

Changes in International Liquidity in 1973Total international reserves increased by $28 billion during the first9 months of 1973, compared to $28 billion in 1972 and $38 billion in 1971.From the end of 1970 to the end of September 1973, total reserves doubled,increasing from $93 billion to $187 billion. As in previous years, most ofthe increase was in foreign exchange and resulted from intervention byforeign central banks in the foreign exchange market to slow down theappreciation of their currencies vis-a-vis the dollar. After the major Europeancountries and Japan decided to allow their currencies to float inrelation to the dollar, the further accumulation of foreign exchange wasreduced. As can be seen from Table 55, foreign exchange reserves increasedby $22 billion during the first 9 months of 1973. Of this amount $14 billionoccurred in the first quarter, before the major European currencies werefloated. The $22 billion increase in foreign exchange reserves consisted of an$8 billion increase in U.S. liabilities to foreign central banks. The remainderconstituted increases in dollar balances of central banks held in commercialbanks outside the United States, and reserves held in currencies other thanthe dollar. Toward the end of the year a reversal of this trend set in, as anincreasing number of foreign central banks sold dollars to slow the declineof their currencies relative to the dollar.Despite the large increase in foreign exchange holdings in 1973, thecomposition of reserves did not change significantly during the year. Theproportion held in gold fell from 24 to 23 percent, while that held inforeign exchange increased from 65 to 67 percent of total reserves. Most ofthe increase in primary reserves (gold, SDR's, and reserve positions inthe Fund) resulted from the devaluation of the dollar in terms of gold andSDR's, which automatically increased by 11 percent the dollar value ofthe existing stock of gold, SDR's, and reserve positions in the Fund.TABLE 55.—Composition of international reserve assets, 1970—73Value of reserve assets l(millions of U.S. dollars)Percent of total reservesType of reserve asset197019711972September1973197019711972September1973Total reserve assets92.6130.6158.8186.9100100100100Gold stock ... ...37.239.138.843.240302423SDR3.16.49.410.63566Reserve position in IMF7.76.96.97.58544Foreign exchange44.678.1103.7125.648606567U.S. liabilities23.850.761.569.826393937i End of period.Note.—Detail may not add to totals because of rounding.Source: Internationa] Monetary Fund (IMF).201