The present paper does not claim to solve the Columbus’ egg conundrum. There even may not be a “silver bullet” formula that would convince the entire membership. However, there may be a simpler, more transparent formula that produces more intuitive and more equitable results for the distribution of quotas across the membership. The paper aims to provide an extensive, comprehensive and hopefully useful overview of the various technical issues involved in choosing an appropriate quota formula. It offers a detailed analysis of the current quota system, illustrating its functioning and showing which countries and groups are most under and over-represented. It also puts forward an analysis of the various avenues of reform that are currently under discussion. To illustrate the main directions of the current reform efforts, it presents three benchmark formulae that could be useful in these discussions. This paper has been motivated by ongoing work at the European Central Bank (ECB) on issues related to the IMF and the international monetary system. The ECB has also been asked to support EU Member States’ reflections on quota reform by providing technical analysis of different options through various simulations. The motivation to write the paper has been inspired by the analysis provided during 2006 and 2007 to the Subcommittee on IMF and related issues (SCIMF) of the Economic and Financial Committee of the EU, and the numerous discussions with SCIMF members that offered helpful insights into this complex matter, which are gratefully acknowledged. The issue of quotas and IMF governance is also of interest to the ECB itself. The implications of the current debate on the set-up and the operation of the IMF will have an important bearing on the functioning of the international monetary system and the global economy, in which the euro area as the world’s largest trading partner and the euro as the world’s second international currency play a significant role and have an important stake. Although the euro area is not a member country of the IMF, all its participating countries are IMF members, and the ECB has observer status at the IMF’s Executive Board. Nevertheless, it should be stressed that any views expressed in this paper are solely those of the authors and should not be seen as the official views of the ECB.
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Paper provided by European Central Bank in its series Occasional Paper Series with number
70.