The speed of adjustment and the sequencing of economic reforms

Abstract

Purpose The purpose of the paper is to review the issues involved in determining the appropriate speed of adjustment and the sequencing of economic reforms, and to develop a checklist of key guidelines for policymakers as a basis for their decision‐making process. Design/methodology/approach The paper develops a conceptual framework based on a survey of the theoretical and empirical literature, and the practical experience of the authors in this area. Findings The analysis in the paper shows that the optimal speed and sequence of reforms is country‐specific. But key policy considerations can help guide policymakers in the design of their reform strategy. Practical implications The arguments favoring a shock approach or a gradual approach are not absolute. Each country has to choose the proper speed of adjustment and sequencing of reforms by examining country‐specific factors. A thorough case‐by‐case analysis is needed before a decision on the appropriate timing and sequencing of reforms can be made. Originality/value The analysis in the paper leads to key reform guidelines for policymakers – covering areas such as prerequisites and resource constraints, political economy considerations, credibility and sustainability of reforms – that are instrumental in developing a well‐sequenced strategy.

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