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The Role of Structural Reforms in Raising Economic Growth in Central America

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  • Andrew J Swiston
  • Luis D Barrot

Abstract

Central America experienced moderate growth during the last decade, including in the years leading up to the global financial crisis, but the rate of convergence toward advanced country income levels has still been slow. Moreover, forecasts imply that these trends will continue. What can be done to spur higher growth in Central America? We bring new data to bear on this question-version 7.0 of the Penn World Table and a new IMF database on structural reforms. Our cross-country panel regression of economic growth using System GMM captures the importance to growth of conditional convergence, factor accumulation, and macro policies. In addition, structural efficiency is a significant factor in explaining growth performance. We construct a broad index of efficiency and find that increasing the degree of structural efficiency by one standard deviation raises growth by ½ percent. This implies that Central American countries could significantly increase their long-run growth rates by increasing the flexibility of markets and improving the quality of regulation.

Suggested Citation

  • Andrew J Swiston & Luis D Barrot, 2011. "The Role of Structural Reforms in Raising Economic Growth in Central America," IMF Working Papers 11/248, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:11/248
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    References listed on IDEAS

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    9. Escaith, Hubert & Paunovic, Igor, 2004. "Reformas estructurales en América Latina y el Caribe en el período 1970-2000," Documentos de Proyectos 10, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
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    Cited by:

    1. Krasnopjorovs, Olegs, 2013. "Latvijas ekonomikas izaugsmi noteicošie faktori
      [Factors of Economic Growth in Latvia]
      ," MPRA Paper 47550, University Library of Munich, Germany.
    2. Christian A Johnson, 2013. "Potential Output and Output Gap in Central America, Panama and Dominican Republic," IMF Working Papers 13/145, International Monetary Fund.
    3. Stephanie Medina Cas & Andrew J Swiston & Luis D Barrot, 2012. "Central America, Panama, and the Dominican Republic; Trade Integration and Economic Performance," IMF Working Papers 12/234, International Monetary Fund.
    4. International Monetary Fund, 2012. "Nicaragua; Ex Post Assessment of Longer-Term Program Engagement," IMF Staff Country Reports 12/258, International Monetary Fund.
    5. repec:wbk:wboper:22023 is not listed on IDEAS
    6. International Monetary Fund, 2012. "Republic of Belarus; Selected Issues," IMF Staff Country Reports 12/114, International Monetary Fund.

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