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Growth Strategies and Dynamics

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  • Mohamed A. El-Erian
  • A. Michael Spence

Abstract

The paper examines the challenges that developing countries face in accelerating and sustaining growth. The cases of China and India are examined to illustrate a more general phenomenon which might be called model uncertainty. As a developing economy grows, its market and regulatory institutions change and their capabilities increase. As a result, growth strategies and policies and the role of government shift. Further, as the models of economies in these transitional states are incomplete and because models used to predict policy impacts in advanced economies may not provide accurate predictions in the developing economy case, growth strategies and policies need to be responsive and to evolve as the economy matures. This has led governments in countries that have sustained high growth to be somewhat pragmatic, to treat the policy directions that emerge from the advanced economy model with circumspection, to be somewhat experimental in seeking to accelerate export diversification, to be sensitive to risks and as a result to proceed gradually in areas such as the timing and sequencing of opening up on the current and capital account. The last is an area in which existing theory provides relatively little specific guidance, but in which there are relatively high risks that decline over time as the market matures.

Suggested Citation

  • Mohamed A. El-Erian & A. Michael Spence, 2008. "Growth Strategies and Dynamics," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 9(1), pages 57-96, January.
  • Handle: RePEc:wej:wldecn:324
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    References listed on IDEAS

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    1. Albert Breton & Gianluigi Galeotti & Pierre Salmon & Ronald Wintrobe, 1995. "Nationalism and Rationality," Post-Print hal-00445587, HAL.
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    4. Akerlof, George A, 1991. "Procrastination and Obedience," American Economic Review, American Economic Association, vol. 81(2), pages 1-19, May.
    5. repec:cup:apsrev:v:87:y:1993:i:03:p:567-576_10 is not listed on IDEAS
    6. Wintrobe,Ronald, 1998. "The Political Economy of Dictatorship," Cambridge Books, Cambridge University Press, number 9780521583299, March.
    7. Abhijit V. Banerjee, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, Oxford University Press, vol. 107(3), pages 797-817.
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    Cited by:

    1. Itzhak Goldberg & John Gabriel Goddard & Smita Kuriakose & Jean-Louis Racine, 2011. "Igniting Innovation : Rethinking the Role of Government in Emerging Europe and Central Asia," World Bank Publications, The World Bank, number 2358.

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