## Identifying Structural Reform Gaps in Emerging Europe, the Caucasus, and Central Asia

_IMF Working Papers, March 30, 2017_

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## Bibliographic details
- Authors: Norbert Funke, Asel Isakova, Maksym Ivanyna
- Published: March 30, 2017
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475590616.001

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### Summary and purpose
- Paper compares structural indicators for 25 countries in Emerging Europe, the Caucasus, and Central Asia with:
  - a generic country with similar characteristics that is 40 percent richer, and
  - a country with the average EU income.
- Uses data from the World Economic Forum’s Global Competitiveness Report as an example.
- Focuses on (approximate) comparisons between countries and does not attempt to establish the link between structural reforms and growth.
- Approach can be applied to other indicators and at a more granular level.

### Key findings
- Improvements are particularly crucial in the areas of:
  - institutions,
  - financial market development,
  - infrastructure,
  - goods and labor market efficiency,
  - areas related to innovation.
- For the more ambitious goal of reaching average EU income, reform needs are correspondingly larger.

### Methodology
- Empirical comparisons rely on structural indicators from the World Economic Forum’s Global Competitiveness Report.
- The methodology emphasizes cross-country (approximate) comparisons rather than causal identification of reform effects on growth.
- Tests are conducted for changes in empirical specifications.

### Caveats and limitations
- Quality of structural indicators may limit inference.
- Possible non-linearities in relationships between indicators and outcomes.
- Potential for reform complementarities that affect the interpretation of single-indicator gaps.

### Policy implications and applications
- Target reform priorities where gaps are largest: institutions, financial sector development, infrastructure, market efficiencies, and innovation-related areas.
- Larger and more comprehensive reforms are required to achieve average EU income relative to a 40 percent richer comparator.
- Methodology can inform prioritization of reforms and be applied to other indicator sets or more granular (subnational or sectoral) analyses.

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_Source: https://www.imf.org/en/publications/wp/issues/2017/03/30/identifying-structural-reform-gaps-in-emerging-europe-the-caucasus-and-central-asia-44781_