Leech, Dennis and Leech, Robert, Dr. (2005) Voting power implications of a unified European representation at the IMF. Working Paper. University of Warwick, Department of Economics, Coventry.

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Abstract

We consider some of the implications of a proposed reform of the voting system of the IMF in which the EU countries cease to be separately represented and are replaced by a single combined representative of the European bloc. The voting weight of the EU bloc is reduced accordingly. We analyse two cases: the Eurozone of 12 countries and the European Union of 25. Using voting power analysis we show that the reform could be very beneficial for the governance of the IMF, enhancing the voting power of individual member countries as a consequence of two large countervailing voting blocs. Specifically we analyse a range of EU voting weights and find the following for ordinary decisions requiring a simple majority: (1) All countries other than those of the EU and the USA unambiguously gain power (measured absolutely or relatively); (2) The sum of powers of the EU bloc and USA is minimized when they have voting parity; (3) The power of every other non-EU member is maximized when the EU and the USA have parity; (4) Each EU member could gain power - despite losing its seat and the reduction in EU voting weight - depending on the EU voting system that is adopted; (5) The USA loses voting power (both absolutely and relatively) over ordinary decisions but retains its unilateral veto over special majority (85%) decisions (as does the EU bloc).

Item Type:	Working or Discussion Paper (Working Paper)
Subjects:	H Social Sciences > HC Economic History and Conditions
Divisions:	Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH):	International Monetary Fund, Voting research, Decision making, Power (Social sciences)
Series Name:	Warwick economic research papers
Publisher:	University of Warwick, Department of Economics
Place of Publication:	Coventry
Date:	January 2005
Number:	No.720
Number of Pages:	40
Status:	Not Peer Reviewed
Access rights to Published version:	Open Access
Funder:	University of Warwick. Centre for the Study of Globalisation and Regionalisation (CSGR)
References:	Benassy-Quere, Agnes and Bowles (2002), “A European Voice at the IMF”, La Lettre du CEPII, No. 216. Bini Smaghi, Lorenzo (2004), “A Single EU Seat in the IMF?”, Journal of Common Market Studies, 42(2), 229-48. Buira, Ariel (2002), A New Voting Structure for the IMF, Washington: G24, www.g24.org/. ----------------(2003), Adjustment of European Quotas to Enhance the Voice and Participation of Developing and Transition Countries, Note Prepared by the G24 Secretariat, Washington: G24, www.g24.org/. Coleman, James S. (1971) "Control of Collectivities and the Power of a Collectivity to Act," in B.Lieberman (ed), Social Choice, New York, Gordon and Breach; reprinted in J.S. Coleman, 1986, Individual Interests and Collective Action, Cambridge University Press. ---------------------- (1973), "Loss of Power", American Sociological Review, 38,1-17. Felsenthal, Dan S. and Moshe Machover (1998), The Measurement of Voting Power, Cheltenham, Edward Elgar. Holler. Manfred and Guillermo Owen (2001), Power Indices and Coalition Formation, Boston/Dordrecht/London: Kluwer Academic Publishers. IMF (2004), IMF Members' Quotas and Voting Power, and IMF Board of Governors, http://www.imf.org/ Kenen, Peter B., Jeffrey Shafer, Nigel Wickes and Charles Wyplosz, (2004), International Economic and Financial Cooperation, London: Centre for Economic Policy Research. Leech, Dennis (2002), “Voting Power in the Governance of the IMF”, Annals of Operations Research, 109: 373-395. ----------------- (2003), “Computing Power Indices for Large Voting Games”, Management Science, 49 (6): 831-838. ----------------- and Robert Leech (2003), Website: Computer Algorithms for Voting Power Analysis, www.warwick.ac.uk/~ecaae/. ----------------- and Robert Leech (2004a), “Voting Power in the Bretton Woods Institutions”, University of Warwick, Centre for the Study of Globalisation and Regionalisation, Discussion Paper 154/04. ------------------------------------------ (2004b), “Voting Power and Voting Blocs”, University of Warwick, Centre for the Study of Globalisation and Regionalisation, Discussion Paper 153/04. Mahieu, Géraldine, Dirk Ooms and Stéphane Rottier (2003), “The Governance of the International Monetary Fund with a Single EU Chair”, Financial Stability Review, Brussels: Banque National de Belgique. Penrose, Lionel (1946), “The Elementary Statistics of Majority Voting”, Journal of the Royal Statistical Society, 109: 53-7. Indices, 30: 107–118. Van Houtven, Leo (2002), Governance of the IMF: Decision Making, Institutional Oversight, Transparency and Accountability, IMF Pamphlet Series no. 53, IMF: Washington. -----------------------(2004), “Rethinking IMF Governance”, Finance and Development, September 2004.
URI:	http://wrap.warwick.ac.uk/id/eprint/1470

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