Abstract
This study used the cumulative prediction error methodology to determine if the equity returns of major U.S. banks were affected by the 1974 SDR change. This change by the IMF was viewed as an opportunity to study the adjustment process in international regulation as well as to focus on the policy's net impact. The results strongly support the contention that banks were adversely affected by the change from a dollar-based SDR to a mixed-currency SDR due to the expected increase in lending by the IMF and due to the expectation of inflation and increased exchange volatility.
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