David Jinkins, Copenhagen Business School

"A Trade Based Optimal Voting Rule for the International Monetary Fund”


Governance at the International Monetary Fund is based on a quota system, and decisions take place by weighted voting. We use a quantitative Ricardian trade model to show that, while weighted voting in general is not optimal, an optimal voting rule still assigns a quota to each country. An important insight of the model is that total trade should not a relevant determinant of optimal voting shares. Instead trade weighted by the crisis probability of trading partners should be used. The model shows how the total level of resources of multilateral institutions should evolve relative to world trade.