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Growth and Structural Reforms; A New Assessment

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  • Lone Engbo Christiansen
  • Thierry Tressel
  • Martin Schindler

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.

Suggested Citation

  • Lone Engbo Christiansen & Thierry Tressel & Martin Schindler, 2009. "Growth and Structural Reforms; A New Assessment," IMF Working Papers 09/284, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:09/284
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    Keywords

    Economic models; Economic reforms; Cross country analysis; Economic growth; Capital account; International financial system; International trade; Fiscal policy; Globalization; Governance; Trade liberalization; Liberalization; Domestic Finance; Trade: Capital Account; tfp; real gdp; trade reforms; gdp per capita;

    JEL classification:

    • F3 - International Economics - - International Finance
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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