Which Reforms Work and Under What Institutional Environment: Evidence from a New Dataset on Structural Reforms

51 Pages Posted: 21 Jul 2010 Last revised: 26 Feb 2014

See all articles by Massimiliano Gaetano Onorato

Massimiliano Gaetano Onorato

University of Bologna - Department of Economics

Alessandro Prati

International Monetary Fund (IMF) - Research Department

Chris Papageorgiou

International Monetary Fund (IMF) - Research Department

Date Written: 2010

Abstract

Are structural reforms growth enhancing? Is the effectiveness of reforms constrained by a country’s distance from the technology frontier or by its institutional environment? This paper takes a new and comprehensive look at these questions by employing a novel dataset that includes several kinds of real (trade, agriculture and networks) and financial (domestic finance, banking, securities, and capital account) reforms for an extensive list of developed and developing countries, going back to the early 1970s. First pass evidence based on growth breaks analysis and on panel growth regressions suggests that on average both real- and financial-sector reforms are positively associated with higher growth. However, in several occasions botched reforms resulted in growth disasters. More importantly, the positive reformgrowth relationship is shown to be highly heterogeneous and to be influenced by a country’s constraints on the authority of the executive power and by its distance from the technology frontier. Finally, there is some evidence that crises (defined as severe growth downturns) are associated with subsequent reform upticks.

Keywords: Financial Reforms, Domestic Finance, Banking, Securities, Capital Account, Real Reforms

JEL Classification: O16, O24, O38, O43

Suggested Citation

Onorato, Massimiliano Gaetano and Prati, Alessandro and Papageorgiou, Chris, Which Reforms Work and Under What Institutional Environment: Evidence from a New Dataset on Structural Reforms (2010). The Review of Economics and Statistics, July 2013, 95(3): 946–968. Available at SSRN: https://ssrn.com/abstract=1635231 or http://dx.doi.org/10.2139/ssrn.1635231

Massimiliano Gaetano Onorato (Contact Author)

University of Bologna - Department of Economics ( email )

Bologna
Italy

Alessandro Prati

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

Macroeconomic Studies Division
700 19th Street NW
Washington, DC 20431
United States
202-623-6275 (Phone)
202-589-6275 (Fax)

Chris Papageorgiou

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

700 19th Street NW
Washington, DC 20431
United States

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