Pace and Sequencing of Economic Policies
IMF Working Papers, June 1, 2005
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- Pace and Sequencing of Economic Policies
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Bibliographic details
- Authors: Juan Zalduendo
- Published: June 1, 2005
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451861372.001
Overview and methodology
- Examines the design of economic policies using factor analysis.
- Advantages of factor analysis highlighted:
- Limits problems from high correlation of economic policy indicators.
- Helps in identifying clusters of economic policy.
- Facilitates derivation of policy design indicators representing the pace and sequence of economic policies.
Key econometric findings
- Introduction of sound economic policies has both level effects and growth effects.
- Caution is necessary when assessing a country's growth prospects immediately following the introduction of new policies.
- Growth strengthens when a country implements policies that outpace either:
- a notional measure of "world average policies", or
- a country's own policy trend.
- Macroeconomic policies play a critical role vis-à-vis microeconomic policies.
- Evidence of sequencing factors in policy implementation:
- Trade liberalization and financial liberalization positively affect growth, but more so if economic stability and fiscal sustainability have been secured.
Policy implications and recommendations
- Design and sequencing of reforms matter for growth outcomes; prioritize establishing economic stability and fiscal sustainability before implementing certain liberalization measures.
- Use factor-based indicators to:
- Identify policy clusters for coordinated reform packages.
- Monitor the pace of policy change relative to world averages and domestic trends.
- Exercise caution in short-term growth forecasts immediately after major policy changes due to level and growth effect dynamics.
Subjects and keywords
- Subjects: Factor models, Fiscal stabilization, Fiscal stance, Fiscal sustainability, Structural reforms
- Keywords: coefficient estimate, factor analysis technique, policy cluster, private sector, trade liberalization, WP
Juan Zalduendo. "Pace and Sequencing of Economic Policies", IMF Working Papers 2005, 118 (2005), accessed 9/17/2026, https://doi.org/10.5089/9781451861372.001