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QUOTA FORMULA–DATA UPDATE AND FURTHER CONSIDERATIONS
IMF POLICY PAPER
QUOTA FORMULA–DATA UPDATE AND FURTHER CONSIDERATIONS
August 2014
August 2014
IMF Policy Paper
IMF staff regularly produces papers proposing new IMF policies, exploring options for reform, or reviewing existing IMF policies and operations. The following documents have been separately released:
The Staff Report prepared by IMF staff and completed on July 2, 2014.
Staff Supplement on Quota Formula – Data Update and Further Considerations – Annexes.
Staff Supplement on Quota Formula – Data Update and Further Considerations – Statistical Appendix.
These documents were prepared by IMF staff and were presented to the Executive Board in an informal session on July 24, 2014. Such informal sessions are used to brief Executive Directors on policy issues, and to receive feedback from them. No decisions are taken at these informal sessions. The views expressed in this paper are those of the IMF staff and do not necessarily present the views of the IMF’s Executive Board.
The IMF’s Transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.
Electronic copies of IMF Policy Papers are available to the public from http://www.imf.org/external/pp/ppindex.aspx
International Monetary Fund
Washington, D.C.
©2014 International Monetary Fund
QUOTA FORMULA–DATA UPDATE AND FURTHER CONSIDERATIONS
July 2, 2014
Executive Summary
Data update. The quota database has been updated by one year through 2012. It also incorporates the recently released 2011 International Comparison Program (ICP) global estimates of purchasing power parity (PPP) rates.
The 2011 ICP estimates are based on broader country coverage than the 2005 estimates as well as further methodological improvements. The 2011 ICP PPP estimates point to a markedly higher aggregate share of emerging markets and developing countries (EMDCs) in global PPP GDP (58.1 percent versus 52.8 percent on the basis of 2005 ICP data), with Asia recording the largest gains and the largest reductions recorded predominantly by the largest advanced countries.
Overall, the results of the quota database update continue the broad trends observed in previous updates. Using the current quota formula, the calculated quota share (CQS) of EMDCs as a group increases by 2.1 percentage points (pp) to 47.4 percent relative to the 2013 update. This reflects a further increase of 1.2 pp from updating the data by one year and an additional 1.0 pp from incorporating the new ICP PPP data.
Quota variables—taking stock. The paper takes stock of previous discussions and revisits those aspects of the quota formula that appear to have generated the most intense discussions. On PPP GDP, the paper discusses the main changes introduced with the 2011 ICP and their impact on individual members’ PPP GDP. Staff also revisits the PPP data quality in light of the ICP update and concludes that the quality of PPP data is broadly comparable to other data used in the quota formula. On openness, the paper reexamines its characteristics and finds that the data update does not materially change the broad outcomes reported in earlier staff work.
Illustrative simulations. The paper presents a limited set of illustrative simulations of possible reforms of the quota formula using the updated quota data. The simulations take as a starting point the outcome of the comprehensive review of the quota formula (QFR) and the informal discussion in June 2013. All simulations exclude variability and explore alternative methods to re-distribute the weight of this variable. Different options for the weight of PPP GDP in the GDP blend as well as a number of alternative openness measures are also considered, as is an increase in compression. These simulations are purely illustrative and do not represent proposals.
Approved By
Andrew Tweedie
Prepared by the Finance Department (In collaboration with the Statistics Department)
Contents
INTRODUCTION
UPDATED QUOTA DATABASE
QUOTA VARIABLES: TAKING STOCK
A. PPP GDP
B. Openness
ILLUSTRATIVE CALCULATIONS
CONCLUDING REMARKS
BOX
1. Data Sources and Methodology
FIGURES
1. Evolution of CQS 2005 – 2012
2. Average Real GDP Growth Rates
3. Developments in External Flows
4. Contributions of Quota Variables to CQS by Vintages and Major Groups
5. Openness and Variability Shares Relative to GDP Share
6. Shares of Major Groups in Each Quota Variable
7. Top 15 Countries - Ratio of Openness Share to GDP Blend Share and Variability Share to GDP Blend Share
8a. Ratio of Openness to Market GDP
8b. Ratio of Openness Shares to GDP Blend Shares
TABLES
1. Distribution of Quotas and Calculated Quotas
2a. Distribution of Quotas and Updated Quota Variables
2b. Updated GDP Blend Variable
3. Top 10 Positive and Negative Changes in Calculated Quota Shares
4. Under- and Overrepresented Countries by Major Country Groups
5. Countries that Benefit from PPP GDP and Compression
6. Countries that Benefit from Openness and Variability
7. Correlations between Quota Variables
8. Openness Shares Under Caps and Compression
9. Illustrative Calculations: Summary
10. Illustrative Calculations - Current GDP and Openness Measures, and Dropping Variability
11. Illustrative Calculations - Current Openness Measure, Dropping Variability, Weight Split Evenly Between GDP and Openness and Different Combinations of GDP Blend
12. Illustrative Calculations - Current Openness Measure, Dropping Variability, Weight Split Between GDP (2/3) and Openness (1/3) and Different Combinations of GDP Blend
13. Illustrative Calculations - Current Openness Measure, Dropping Variability, All Weight to GDP, and Different Combinations of GDP Blend
14. Illustrative Calculations - Current Openness Measure, Dropping Variability, Weight of Openness Reduced to 0.25, and Different Combinations of GDP Blend
15. Illustrative Calculations - Current GDP Blend, Dropping Variability, Weight Split Evenly Between GDP and Openness, and Different Openness Measures
16. Illustrative Calculations - Current GDP Blend, Dropping Variability, Weight Split Between GDP (2/3) and Openness (1/3), and Different Openness Measures
17. Illustrative Calculations - Current GDP Blend, Dropping Variability, All Weight to GDP, and Different Openness Measures
18. Illustrative Calculations - Current GDP and Openness Measures, Dropping Variability, and Higher Compression (0.925)