Growth and Structural Reforms: A New Assessment

By Lone Engbo Christiansen, Thierry Tressel, Martin Schindler

December 1, 2009

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Lone Engbo Christiansen, Thierry Tressel, and Martin Schindler. Growth and Structural Reforms: A New Assessment, (USA: International Monetary Fund, 2009) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper presents a simultaneous assessment of the relationship between economic performance and three groups of economic reforms: domestic finance, trade, and the capital account. Among these, domestic financial reforms, and trade reforms, are robustly associated with economic growth, but only in middle-income countries. In contrast, we do not find any systematic positive relationship between capital account liberalization and economic growth. Moreover, the effect of domestic financial reforms on economic growth in middle-income countries is explained by improvements in measured aggregate TFP growth, not by higher aggregate investment. We present evidence that variation in the quality of property rights helps explain the heterogeneity of the effectiveness of financial and trade reforms in developing countries. The evidence suggests that sufficiently developed property rights are a precondition for reaping the benefits of economic reform. Our results are robust to endogeneity bias and a number of alternative specifications.

Subject: Capital account, Capital account liberalization, Inflation, Personal income, Total factor productivity

Keywords: Capital account reform, Dependent variable, Liberalization index, WP

Publication Details

Pages:

52
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2009/284
Stock No:

WPIEA2009284
ISBN:

9781451874297
ISSN:

1018-5941

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