Staff Discussion Notes

Structural Reforms to Accelerate Growth, Ease Policy Trade-offs, and Support the Green Transition in Emerging Market and Developing Economies

By Nina Budina, Christian H Ebeke, Florence Jaumotte, Andrea Medici, Augustus J Panton, Marina Mendes Tavares, Bella Yao

September 22, 2023

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Nina Budina, Christian H Ebeke, Florence Jaumotte, Andrea Medici, Augustus J Panton, Marina Mendes Tavares, and Bella Yao. Structural Reforms to Accelerate Growth, Ease Policy Trade-offs, and Support the Green Transition in Emerging Market and Developing Economies, (USA: International Monetary Fund, 2023) accessed October 12, 2024

Disclaimer: This Staff Discussion Note represents the views of the authors and does not necessarily represent IMF views or IMF policy. The views expressed herein should be attributed to the authors and not to the IMF, its Executive Board, or its management. Staff Discussion Notes are published to elicit comments and to further debate.

Summary

In the aftermath of the COVID-19 pandemic, emerging market and developing economies are grappling with economic scarring, social tension, and reduced policy space. Policy actions are already urgently needed to boost growth in the near term and support the ongoing green transition. At the same time, high public debt and persistently high inflation have constrained policy space, posing difficult policy trade-offs. This Staff Discussion Note focuses on emerging market and developing economies and proposes a framework for prioritization, packaging, and sequencing of macrostructural reforms to accelerate growth, alleviate policy trade-offs, and support the green transition. The note shows that prioritizing the removal of the most binding constraints on economic activity, bundling reforms (governance, business deregulation, and external sector reforms), and appropriate sequencing of other reforms (such as labor market and credit sector reforms) can help front-load reform gains. In emerging market and developing economies with large initial structural gaps, the estimated output effects of such a major reform package are sizable—about 4 percent in two years and 8 percent in four years. Achieving higher growth and lower absolute carbon emissions over time requires a well-designed strategy that includes both macrostructural and green reforms.

Subject: Climate policy, Economic sectors, Emerging and frontier financial markets, Environment, Financial crises, Financial markets, Greenhouse gas emissions, Macrostructural analysis, Structural reforms

Keywords: Caribbean, Climate policy, Climate policy stringency, Developing economy, Emerging and frontier financial markets, Global, Greenhouse gas emissions, Policy action, Policy space, Policy trade-off, Structural reforms

Publication Details

  • Pages:

    48

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

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  • Series:

    Staff Discussion Notes No. 2023/007

  • Stock No:

    SDNEA2023007

  • ISBN:

    9798400250095

  • ISSN:

    2617-6750