Working Paper: NBER ID: w12544
Authors: Jorge Braga de Macedo; Joaquim Oliveira Martins
Abstract: This paper discusses the design of structural policies by relating second-best results and the complementarity of reforms. It computes a complementarity index based on structural reform indicators compiled by the EBRD for transition countries, assuming that the run-up to EU integration corresponds to a nearly complete policy cycle. Using econometric panel estimates, the level of reforms and changes in their complementarity are found to be positively related to output growth, corrected for endogeneity, and given initial conditions and the extent of macroeconomic stabilisation.
Keywords: Economic Reforms; Growth; Transition Economies; Complementarity; Structural Policies
JEL Codes: P20; C33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| level of reforms (RL) (R50) | output growth (GDP growth) (O40) |
| changes in reform complementarity (RC) (P41) | output growth (GDP growth) (O40) |
| initial conditions (C62) | level of reforms (RL) (R50) |
| macroeconomic stabilization (E63) | level of reforms (RL) (R50) |
| inflation rate (E31) | macroeconomic stabilization (E63) |
| level of reforms (RL) (R50) | changes in reform complementarity (RC) (P41) |
| changes in reform complementarity (RC) (P41) | long-term output growth (GDP growth) (O40) |
| level of reforms (RL) + changes in reform complementarity (RC) (E69) | short-term output growth (GDP growth) (O40) |