THE PRINCIPAL COMPONENTS APPROACH TO QUOTA FORMULATION AT THE IMF

Thierry Nguéma-Affane

MPRA Paper from University Library of Munich, Germany

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.

Keywords: International Monetary Fund; Quota Formula; Principal Components Analysis (search for similar items in EconPapers)
JEL-codes: C19 F02 F33 F53 (search for similar items in EconPapers)
Date: 2008-03-10
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:7618

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