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Abstract

The IMF has been criticized for lack of representation and being an instrument of the US. The crisis of trust pushed IMF to initiate series of quota and governance reforms since 2006 to reflect the increasing importance of emerging market countries. While the reforms have apparently increased quotas and voting shares of emerging countries like China, the reforms' impact on the US authority is inadequately informed by empirical data. This paper investigates the reforms' actual impact on the US authority by examining the change of US voting power and the increase of China's influence in the IMF lending process. The change of US voting power is measured by the Banzhaf Index and Coleman Index, and China’s influence in the IMF lending process is examined through the biprobit model with partial observability. The model measures the probability of participating in an IMF program, which depends on decisions made both by the IMF and by the borrowing country. The empirical results suggest that there is a gap between voting shares and actual voting power in a weighted voting system. The voting power of the US is not much affected by the quota and governance reforms, and China has not posed any substantive challenge on the US authority in the IMF. These conclusions have important implications for understanding the stability of the US authority and a power-based international financial architecture.

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