Growth and Structural Reforms: A New Assessment

53 Pages Posted: 5 Jan 2010

See all articles by Thierry Tressel

Thierry Tressel

International Monetary Fund (IMF) - Research Department

Martin Schindler

International Monetary Fund (IMF)

Lone Engbo Christiansen

affiliation not provided to SSRN

Date Written: December 2009

Abstract

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.

Keywords: Capital account, Cross country analysis, Economic growth, Economic models, Economic reforms, Fiscal policy, Globalization, Governance, International financial system, International trade, Trade liberalization

Suggested Citation

Tressel, Thierry and Schindler, Martin and Christiansen, Lone Engbo, Growth and Structural Reforms: A New Assessment (December 2009). IMF Working Papers, Vol. , pp. 1-52, 2009. Available at SSRN: https://ssrn.com/abstract=1531517

Thierry Tressel (Contact Author)

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States

Martin Schindler

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Lone Engbo Christiansen

affiliation not provided to SSRN

No Address Available

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