Book contents
- Frontmatter
- Contents
- The G-24
- List of Contributors
- Foreword
- 1 Introduction
- 2 The Bretton Woods Institutions: Governance without Legitimacy?
- 3 Reforming the International Monetary Fund: Towards Enhanced Accountability and Legitimacy
- 4 Improving IMF Governance and Increasing the Influence of Developing Countries in IMF Decision-Making
- 5 Issues on IMF Governance and Representation: An Evaluation of Alternative Options
- 6 Making the IMF and the World Bank More Accountable
- 7 Purchasing Power Parities and Comparisons of GDP in IMF Quota Calculations
- 8 Measuring Vulnerability: Capital Flows Volatility in the Quota Formula
- 9 Enhancing the Voice of Developing Countries in The World Bank: Selective Double Majority Voting and a Pilot Phase Approach
- 10 Voting Power Implications of a Double Majority Voting Procedure in the IMF's Executive Board
- 11 Power versus Weight in IMF Governance: The Possible Beneficial Implications of a United European Bloc Vote
- 12 Changing IMF Quotas: The Role of the United States Congress
8 - Measuring Vulnerability: Capital Flows Volatility in the Quota Formula
Published online by Cambridge University Press: 05 March 2012
- Frontmatter
- Contents
- The G-24
- List of Contributors
- Foreword
- 1 Introduction
- 2 The Bretton Woods Institutions: Governance without Legitimacy?
- 3 Reforming the International Monetary Fund: Towards Enhanced Accountability and Legitimacy
- 4 Improving IMF Governance and Increasing the Influence of Developing Countries in IMF Decision-Making
- 5 Issues on IMF Governance and Representation: An Evaluation of Alternative Options
- 6 Making the IMF and the World Bank More Accountable
- 7 Purchasing Power Parities and Comparisons of GDP in IMF Quota Calculations
- 8 Measuring Vulnerability: Capital Flows Volatility in the Quota Formula
- 9 Enhancing the Voice of Developing Countries in The World Bank: Selective Double Majority Voting and a Pilot Phase Approach
- 10 Voting Power Implications of a Double Majority Voting Procedure in the IMF's Executive Board
- 11 Power versus Weight in IMF Governance: The Possible Beneficial Implications of a United European Bloc Vote
- 12 Changing IMF Quotas: The Role of the United States Congress
Summary
Abstract:
This paper discusses a proposal to include capital flows volatility as an additional variable in the quota formula. The motivation is to capture macroeconomic volatility associated with capital accounts shocks as well as countries' vulnerabilities to balance of payment crisis. A proposal to this effect was requested by the G-24 Ministers in the communiqué of October 2004 and also introduced in recent quota reviews at the IMF.
However, the methodology put forward by IMF staff papers measures capital flows volatility in dollar terms. This measure does not fully capture the vulnerabilities of balance of payment crises because it does not take into account the differential macroeconomic impact of volatility among developing and industrial countries. In particular, fluctuation in capital flows implies a bigger adjustment for developing countries since capital flows to these countries represent a larger share of their economies and tend to be more volatile.
We propose an alternative measurement of capital flow volatility based on the volatility of net capital flows as a proportion of GDP and argue that it is a more appropriate measure to capture the economic effects of capital flow volatility. We also measure volatility in exports and capital flows altogether as a share of GDP to capture countries' total vulnerabilities to balance of payment crisis arising not only from capital account shocks but also from current account shocks, i.e. commodity shocks.
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- Reforming the Governance of the IMF and the World Bank , pp. 195 - 212Publisher: Anthem PressPrint publication year: 2005
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