The Unassuming Economist

From the IMF’s latest WEO analytical chapter:

“The pace of structural reforms in emerging market and developing economies was strong during the 1990s, but it has slowed since the early 2000s. Using a newly constructed database on structural reforms, this chapter finds that a reform push in such areas as governance, domestic and external finance, trade, and labor and product markets could deliver sizable output gains in the medium term. A major and comprehensive reform package might double the speed of convergence of the average emerging market and developing economy to the living standards of advanced economies, raising annual GDP growth by about 1 percentage point for some time. At the same time, reforms take several years to deliver, and some of them—easing job protection regulation and liberalizing domestic finance—may entail greater short-term costs when carried out in bad times; these are best implemented under favorable economic conditions and early in authorities’ electoral mandate. Reform gains also tend to be larger when governance and access to credit—two binding constraints on growth—are strong, and where labor market informality is higher—because reforms help reduce it. These findings underscore the importance of carefully tailoring reforms to country circumstances to maximize their benefits.”