IMF Refines Analysis and Advice on Structural Reforms
The potential payoff from different types of reforms varies across income groups—structural reforms that are typically more effective for a low-income country might not have the same impact in a country that is further along the development curve, the study says (see Chart 1).
But structural reforms alone are not a “silver bullet” for macroeconomic success, the authors stress.
“Strong country ownership and the ability to sustain reforms appear to be crucial for reaping the productivity and growth benefits,” says Sanjaya Panth, Deputy Director of the IMF’s Strategy, Policy, and Review Department.
Reigniting growth potential
To achieve economic health, countries often need to make changes to the basic structure of their economies. Structural reforms are measures that aim to raise productivity by improving the technical efficiency of markets and institutional structures, or by reducing impediments to the efficient allocation of resources. These range from measures as diverse as banking supervision reforms and property right laws to changes in tariff rates or rules on hiring and firing.
The IMF is honing in on the role of structural reforms in boosting potential growth—a key challenge for policymakers since the global financial crisis, when many countries have been stuck in a cycle of lackluster growth and high unemployment. Nearly all countries have seen a slowdown in productivity growth, with potential growth weakening in many cases as well.
In the six years since the crisis, many countries face a situation where policies to support demand and revive growth—such as fiscal stimulus and unconventional monetary policy—risk losing their effectiveness or are running out of space. In these circumstances, policymakers are increasingly turning to structural reforms to complement other efforts to jumpstart growth.
Although the Fund has stepped up its efforts since the crisis to examine how structural reforms affect economic outcomes, the new study aims to help the IMF take a more strategic approach to structural reform areas that might warrant closer attention, as called for in the 2014 Triennial Surveillance Review.
“If the Fund is to invest more systematically in supporting countries’ reform needs, we need to...
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