Structural Reforms and Economic Performance in Advanced and Developing Countries
Occasional Papers, October 15, 2009
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- Structural Reforms and Economic Performance in Advanced and Developing Countries
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Bibliographic details
- Authors: Jonathan David Ostry, Alessandro Prati, Antonio Spilimbergo
- Published: October 15, 2009
- Series: Occasional Papers
- DOI: https://doi.org/10.5089/9781589068186.084
Scope and dataset
- Examines the impact on economic performance of structural policies—policies that increase the role of market forces and competition in the economy, while maintaining appropriate regulatory frameworks.
- Uses a new dataset covering reforms of:
- domestic product markets,
- international trade,
- the domestic financial sector,
- the external capital account.
- Sample covers reforms in 91 developed and developing countries.
Key empirical findings on growth
- Real and financial reforms boost income growth, with particular emphasis on:
- domestic financial liberalization,
- trade liberalization,
- agricultural liberalization.
- Growth effects differ significantly across alternative reform sequencing strategies:
- A trade-before-capital-account strategy achieves better outcomes than the reverse, or even than a "big bang".
- Liberalizing the domestic financial sector together with the external capital account is growth-enhancing, provided the economy is relatively open to international trade.
Financial sector, resilience, and transmission mechanisms
- Relatively liberalized domestic financial sectors enhance the economy's resilience.
- Such liberalization reduces output costs from adverse terms-of-trade and interest-rate shocks.
- Increased credit availability is identified as one of the key mechanisms through which financial liberalization improves resilience.