IMF Refines Analysis and Advice on Structural Reforms
Reform priorities, and their productivity payoffs, evolve as economies develop
Institution to develop toolkit for deeper analysis, 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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