THE PRINCIPAL COMPONENTS APPROACH TO QUOTA FORMULATION AT THE IMF

Nguéma-Affane, Thierry (2008): THE PRINCIPAL COMPONENTS APPROACH TO QUOTA FORMULATION AT THE IMF.

Abstract

This paper explores and supports the use of the principal components analysis to objectively establish countries’ relative economic size and determine variables’ weights in a new IMF quota formula. This approach shows a rebalancing of quotas shares in favor of developing countries over time but suggests that PCA-generated quota formulas can only guide and not determine IMF quota structure. The simulation of ad hoc quota increases using PCA-generated quota formulas indicates that a rebalancing of actual quota shares and voting power in favor of developing countries, while preserving low-income countries voting share, is achievable if advanced economies forego increases in their quotas and total basic votes are at least tripled.

• Item Type: MPRA Paper
• Language: English
• Keywords: International Monetary Fund; Quota Formula; Principal Components Analysis
• Subjects: F - International Economics > F0 - General > F02 - International Economic Order and Integration; F - International Economics > F5 - International Relations, National Security, and International Political Economy > F53 - International Agreements and Observance ; International Organizations; C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C19 - Other; F - International Economics > F3 - International Finance > F33 - International Monetary Arrangements and Institutions

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