Structural Reforms and External Rebalancing

Author/Editor:

Alexander Culiuc ; Annette Kyobe

Publication Date:

August 4, 2017

Electronic Access:

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

Empirical research on structural reforms has focused primarily on their impact on growth and productivity. Yet an often-invoked rationale for structural reforms is their impact on external adjustment. This paper finds little evidence that structural reforms improve the current account in the short run, but they can increase the responsiveness and resilience of the economy to external shocks. In particular, elasticities of exports with respect to the real effective exchange rate increase with some structural indicators, suggesting that structural reforms facilitate the reallocation of resources to the tradable sector in response to a negative external shock. The paper concludes that structural reforms, while not having an immediate positive impact on the current account balance, can be an important complement to traditional macroeconomic adjustment.

Series:

Working Paper No. 17/182

Subject:

English

Publication Date:

August 4, 2017

ISBN/ISSN:

9781484313732/1018-5941

Stock No:

WPIEA2017182

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

51

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