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"The authors study how the effect of trade openness on economic growth depends on complementary reforms that help a country take advantage of international competition. This issue is illustrated with a simple Harris-Todaro model where output gains after trade liberalization depend on the degree of labor market flexibility. In that model, trade protection may ameliorate the problem of underemployment (and underproduction) in sectors affected by labor market distortions. Hence, trade liberalization unambiguously increases per capita income only when labor markets are sufficiently flexible. The authors then present some panel evidence on how the growth effect of openness depends on a variety of structural characteristics. For this purpose, they use a non-linear growth regression specification that interacts a proxy of trade openness with proxies of educational investment, financial depth, inflation stabilization, public infrastructure, governance, labor-market flexibility, ease of firm entry, and ease of firm exit. They find that the growth effects of openness are positive and economically significant if certain complementary reforms are undertaken. "--World Bank web site.

Policy Objectives • Policy Designs and Consistency • Policy Coordination --- Trade Policy • International Trade Organizations --- Economic Growth of Open Economies --- General

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Over the past decade, Lesotho and Swaziland have faced significant volatility in their fiscal revenues, owing to highly unstable Southern African Customs Union (SACU) receipts. Based on model analysis, this paper explores the advantages of implementing fiscal rules to deal with such volatility. It finds that the use of a structural balance target could smooth the growth impact from revenue shocks while helping preserve sufficient international reserves during bad times. From a long-term perspective, it suggests possible welfare gains from introducing fiscal rules. Last, it concludes that, based on experiences in other countries, developing strong institutions and improving public financial management are necessary steps to ease the transitions to a rules-based fiscal policy framework.

Policy Objectives • Policy Designs and Consistency • Policy Coordination --- Fiscal Policy • Modern Monetary Theory --- Deficit • Surplus --- Intergovernmental Relations • Federalism • Secession --- Asset prices --- Banking crises --- Banks and Banking --- Commercial products --- Commodities --- Commodity Markets --- Deflation --- Economic & financial crises & disasters --- Financial Crises --- Financial crises --- Financial Risk Management --- Housing prices --- Housing Supply and Markets --- Housing --- Inflation --- International economics --- Investment & securities --- Investments: Commodities --- Labor economics --- Labor Economics: General --- Macroeconomics --- Price Level --- Prices --- Property & real estate --- Real Estate --- Banking --- Central banks --- Expenditure --- Expenditures, Public --- Finance, Public --- Fiscal Policy --- Fiscal policy --- Fiscal rules --- Foreign exchange reserves --- International reserves --- Monetary Policy --- National Government Expenditures and Related Policies: General --- Public finance & taxation --- Public Finance --- Public financial management (PFM) --- United States --- Lesotho, Kingdom of