Does the standard set of economic policy recommendations matter for growth? That is, should we consider the interventions effective - and potentially worth supporting?

Economists have recently been proclaiming the death of the "Washington Consensus," that is, "a set of 10 economic policy prescriptions considered to constitute the "standard" reform package promoted for crisis-wracked developing countries by Washington, D.C.-based institutions such as the International Monetary Fund (IMF), World Bank and United States Department of the Treasury."

Many economists have said that we aren't sure if this works. Bill Easterly, an economist at NYU, argues that it was actually stupendously effective, and people just took a while to notice - the criticisms of the Washington consensus policies are overstated.

The linked site contains a very long video with him discussing this. There is also a link to the PDF of the presentation near bottom. From the conclusions in the PDF:

New Stylized Facts

• Much more reform happened 1999-2015 compared to 1980-98

• Correlated with improvements in growth

• Improved policy outcomes predict part or all of improved growth in Latin America and Africa 1999-2015

Conclusions on new facts

• More credit to reform movement in eliminating extreme policies, which old
criticisms did not sufficiently notice.

• The literature (including this author) may have gone too far on proclaiming ignorance on policies and growth: “Perhaps we will never learn where {growth} will start or what will make it continue.” (Banerjee)

• The facts here support theoretical predictions that extreme anti-market policies kill off growth, while reversal of extreme policies will allow growth recoveries.


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