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The Principal Components Approach To Quota Formulation At The Imf

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  • Nguéma-Affane, Thierry

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.

Suggested Citation

  • Nguéma-Affane, Thierry, 2008. "The Principal Components Approach To Quota Formulation At The Imf," MPRA Paper 7618, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:7618
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    References listed on IDEAS

    as
    1. François Combarnous, 2003. "Le développement de l'humain comme préalable au développement économique : l'apport de l'analyse en composantes principales," Documents de travail 84, Groupe d'Economie du Développement de l'Université Montesquieu Bordeaux IV.
    2. Mr. Abbas Mirakhor & Mr. Iqbal Mehdi Zaidi, 2006. "Rethinking the Governance of the International Monetary Fund," IMF Working Papers 2006/273, International Monetary Fund.
    3. Dejian Lai, 2000. "Temporal Analysis of Human Development Indicators: Principal Component Approach," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 51(3), pages 331-366, September.
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    More about this item

    Keywords

    International Monetary Fund; Quota Formula; Principal Components Analysis;
    All these keywords.

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
    • C19 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Other
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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