The Role of Structural Reforms in Raising Economic Growth in Central America

October 1, 2011

Preview Citation

Format: Chicago

Andrew J Swiston, and Luis D Barrot. The Role of Structural Reforms in Raising Economic Growth in Central America, (USA: International Monetary Fund, 2011) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Central America experienced moderate growth during the last decade, including in the years leading up to the global financial crisis, but the rate of convergence toward advanced country income levels has still been slow. Moreover, forecasts imply that these trends will continue. What can be done to spur higher growth in Central America? We bring new data to bear on this question-version 7.0 of the Penn World Table and a new IMF database on structural reforms. Our cross-country panel regression of economic growth using System GMM captures the importance to growth of conditional convergence, factor accumulation, and macro policies. In addition, structural efficiency is a significant factor in explaining growth performance. We construct a broad index of efficiency and find that increasing the degree of structural efficiency by one standard deviation raises growth by ½ percent. This implies that Central American countries could significantly increase their long-run growth rates by increasing the flexibility of markets and improving the quality of regulation.

Subject: Commodity markets, Financial markets, Foreign exchange, Human capital, Labor, Macrostructural analysis, National accounts, Personal income, Purchasing power parity, Structural reforms

Keywords: Central America, Central America dummy, Commodity markets, Economic growth, Factor Accumulation, Financial Reform, Financial system, Financial system Index, Growth performance, Human Capital, Personal income, Product markets index, Product markets market index, Purchasing power parity, Structural Reform, Structural reforms, System GMM, WP

Publication Details

Pages:

20
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2011/248
Stock No:

WPIEA2011248
ISBN:

9781463923273
ISSN:

1018-5941

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