Structural Reform Waves and Economic Growth

66 Pages Posted: 17 Nov 2017

See all articles by Marco Marrazzo

Marco Marrazzo

European Central Bank (ECB)

Alessio Terzi

Hertie School of Governance

Date Written: November 14, 2017


At a time of slow growth in several advanced and emerging countries, calls for more structural reforms are multiplying. However, estimations of the short- and medium-term impact of these reforms on GDP growth remain methodologically problematic and still highly controversial. We contribute to this literature by making a novel use of the non-parametric Synthetic Control Method to estimate the impact of 23 wide-reaching structural reform packages (including both real and financial sector measures) rolled out in 22 countries between 1961 and 2000. Our results suggest that, on average, reforms started having a significant positive effect on GDP per capita only after five years. Ten years after the beginning of a reform wave, GDP per capita was roughly 6 percentage points higher than the synthetic counterfactual scenario. However, average point estimates mask a large heterogeneity of outcomes. Benefits tended to materialise earlier, but overall to be more limited, in advanced economies than in emerging markets. These results are confirmed when we use a parametric dynamic panel fixed effect model to control for the rich dynamics of GDP, and are robust to a variety of alternative specifications, placebo and falsification tests, and to different indicators of reform.

Keywords: Structural Reforms, Economic Growth, Synthetic Control

JEL Classification: E65, O11, O43, O47

Suggested Citation

Marrazzo, Marco and Terzi, Alessio, Structural Reform Waves and Economic Growth (November 14, 2017). ECB Working Paper No. 2111, Available at SSRN: or

Marco Marrazzo (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314

Alessio Terzi

Hertie School of Governance ( email )

Friedrichstra├če 180
Berlin, 10117

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