An atheoretic evaluation of success in structural adjustment
The author presents and implements a methodology for assessing the success of structural adjustment based on a"fixed effect"method. He examines data for 75 countries over 11 years. Performance indicators include measures of inflation, economic growth, external balance, and physical investment. He measures government policies in terms of spending, trade regime, financial deepening, and real exchange rate policy. The empirical estimates he obtains suggest that ranking countries by adjusted economic performance yields significantly different results than ranking them by historical performance. Further, countries following a prescription of relatively low government spending, deep financial markets, and outward orientation in trade policy performed significantly better than those that did not. This prescription was correlated significantly with more rapid economic growth, current accounts with lower deficits, expanded investment, and reduced inflation.
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