Appendix I. Selection of the Database, Derivation of Quota Variables, and Other Issues33
38. This appendix discusses the required data, the selection of the database, and the derivation of the data series used for the quota calculations.
This paper was prepared by a staff team led by Sheila Bassett and including Sherwyn Williams, Carlos Janada, Hannah Lin, Sergio Rodriguez, Rossen Rozenov, Thomas Shuster, August Dabney, and Barbara Wennerholm.
The Fourteenth General Review of Quotas must be completed no later than January 28, 2013, i.e., five years from the date on which the Thirteenth General Review was completed. Under Rule D-3 of the Fund’s Rules and Regulations, if it is decided to conduct a general review of quotas before the time at which such a review must be undertaken by the Board of Governors, the Executive Board shall appoint a Committee of the Whole for this purpose promptly. It is envisaged that the Committee of the Whole could be formed by the time of the 2009 Annual Meetings.
Communiqué of the International Monetary and Financial Committee of the Board of Governors of the International Monetary Fund (Press Release No. 09/139, 4/25/09).
The Board of Governors is required to conduct a general review of members’ quotas and, if it deems it appropriate, propose an adjustment at intervals of not more than five years (Article III, Section 2(a)).
See Thirteenth General Review of Quotas––Draft Report of the Executive Directors to the Board of Governors (12/19/07).
The second round increases under the 2008 reform only come into effect after the proposed Amendment of the Articles on Voice and Participation has entered into effect and the relevant members have consented to and paid for their quota increases. As of August 27, 32 members accounting for 61.3 percent of the total voting power had accepted the proposed Amendment, well short of the requisite majorities.
See IMF Executive Board Discusses Governance Reform, Public Information Notice No. 09/98, 8/4/09 (http://www.imf.org/external/np/sec/pn/2009/pn0998.htm). Outside observers also continue to highlight this issue. For example, the Eminent Persons Group noted that the changes in voting power to date have been marginal compared with the changes occurring globally and called for an accelerated process of quota reform (see Report of the Committee on IMF Governance Reform, March 24, 2009).
For example, in the 11th review, 10 percent of the overall increase was distributed to members whose ratios of calculated to actual quota shares exceeded one or whose quotas were significantly out of line with their relative economic positions.
An 85 percent majority of the total voting power is required for any change in quotas (Article III, Section 2c).
The adjustment coefficient provides a summary measure of the extent to which deviations between actual and calculated quotas are reduced by quota share adjustments (see Table 1).
See Quotas—Updated Calculations and Data Adjustments (7/11/07).
Detailed information on the process and methodology used in the data update is provided in Appendix I.
See World Economic Outlook (WEO), Frequently Asked Questions, “What is “Gross domestic product based on purchasing-power-parity (PPP) valuation of country GDP”? “http://www.imf.org/external/pubs/ft/weo/faq.htm#q4e
See Reform of Quota and Voice in the International Monetary Fund—Report of the Executive Board to the Board of Governors, March 28, 2008. http://www.imf.org/external/np/pp/eng/2008/032108.pdf. For a discussion of data adjustments see Quotas—Updated Calculations and Data Adjustments (7/11/07), http://www.imf.org/external/np/pp/2007/eng/071107.pdf
For continuity, staff has maintained the country classification used in the 2008 Reform. This differs from the current WEO classification in that Korea and Singapore are classified as advanced economies in the WEO but are included in “developing Asia” for purposes of quota work. In addition, Slovenia and Malta are classified as advanced economies by WEO, but as EMDCs in the quota papers.
Since the reform concluded, Kosovo became a member on June 29, 2009. Incorporating Kosovo into the data set for quotas results in 55 members being out of line prior to the 2008 reform.
To provide a common benchmark, the pre-2008 reform ratios use the new quota formula and data ended 2005.
Reform of Quota and Voice in the International Monetary Fund—Report of the Executive Board to the Board of Governors, March 28, 2008. http://www.imf.org/external/np/pp/eng/2008/032108.pdf.
For these reasons, the external Quota Formula Review Group in 2000 had proposed to exclude openness altogether from the formula (seeExternal Review of the Quota Formulas, 5/1/00), and there was also a longstanding practice of making adjustments to the quota database for certain activities relating to re-exports and international financial centers.
For data covering 69 countries, see Johnson, R., Noguera, G. (2009): Accounting for Intermediates: Production Sharing and Trade in Value Added, Working paper.; and for the U.S. see National Research Council. (2006). Analyzing the U.S. content of imports and the foreign content of exports. Washington, DC: The National Academies Press.
Discussions have focused on the four currency unions where regional surveillance by the Fund has been formalized: Euro Area, Eastern Caribbean Currency Union (ECCU), Central African Economic and Monetary Union (CEMAC), and West African Economic and Monetary Union (WAEMU).
See A New Quota Formula—Additional Considerations (3/14/07).
As of end-July 2009, 10 members of WAEMU, 3 members of CEMAC and 1 member of ECCU had arrangements with the Fund.
See A New Quota Formula—Additional Considerations (3/14/07) and Quota and Voice Reform—Stocktaking and Further Considerations (7/11/07).
See for instance, M. Schindler, “Measuring Financial Integration: A New Data Set,” IMF Staff Papers, Vol. 56, No. 1, which provides measures of de jure restrictions on cross-border financial transactions for 91 countries for the period 1995–2005.
In the current update, 110 economies reported IIP data to STA for publication in IFS with 108 members reporting three or more years of IIP data in the period 2003–07. IIP data for 2007 were reported under IFS for 97 members. In the previous data update, 100 economies reported full or partial data to STA for publication and 91 members reported data for three or more years in the period 2001–05. IIP data for 2005 were reported under IFS for 81 members.
See A New Quota Formula--Additional Considerations (3/14/07).
Specifically, the balance of payments data for financial transactions in IFS record the net incurrence of external liabilities and the net acquisition of external financial assets by residents.
Chairman’s Summing Up, Quota and Voice Reform—Stocktaking and Further Considerations (8/16/07).
See Appendix I of Quota and Voice Reform—Stocktaking and Further Considerations (7/11/07) http://www.imf.org/external/np/pp/2007/eng/071107a.pdf and Appendix 2 of Quota and Voice Reform—Key Elements of a Potential Package of Reforms (2/26/08) http://www.imf.org/external/np/pp/eng/2008/022608.pdf.
Previous staff estimates suggested that restoring the ratio of quotas to global economic indicators applying at the time of the last general quota increase would require a quota increase on the order of 55–130 percent. See Review of the Adequacy of and Options for Supplementing Fund Resources ( 1/12/09).
The allocation method used for the two ad hoc increases follows that used for the second round of ad hoc quota increases, where increases are allocated to members based on a uniform proportional reduction in members’ out-of-lineness.
GDP and balance of payments data for the updated quota calculations were compiled by STA in coordination with FIN. The STA team comprised René Piché, Colleen Cardillo, René Fievet, Jean Galand, Lisbeth Rivas, Maria Arce, Mbaye Gueye, and Dwayne Raiford.
The current Balance of Payments Manual, fifth edition (BPM5), includes current transfers in the current account and capital transfers in the capital account, unlike the earlier fourth edition (BPM4), which included all transfers in the current account. Accordingly, to help ensure comparability with previous quota calculations, both current and capital transfers-excluding exceptional financing, to the extent possible-are included here in current receipts.
Ibid; there are only exceptional financing transactions on the credit side of the current and capital accounts.
The variable is referred to as “net capital flows” to maintain continuity with the term used in previous quota calculations.
In this paper, the data drawn from the EDF are referred to as the IFS database, following the practice in past quota review papers.
The cut off date for both IFS and WEO data was January 31, 2009.
Eight countries, mainly in Africa and Asia, reported some data for IFS in the 1995–2007 period but did not report data during the 2003–2007 period.
The methods used to fill gaps were, in principle, largely similar to those used for the purpose of publishing world and regional summary tables in the Balance of Payments Statistics Yearbook (BOPSY), Part 2, and were used in External Review of Quota Formulas—Quantification (4/12/2001).
The term “Net capital flows” refers to transactions in the financial account.
Consistent with the treatment of reserves for the 2001 ad hoc quota increase for China, P.R., Hong Kong, SAR and Macau, SAR’s reserves are not included for quota calculations.
The estimation procedures took into account countries’ reporting of the relative shares of compensation of employees in total income in prior periods.