El-Erian, Mohamed A.Spence, Michael2017-08-282017-08-282008World Economicshttps://hdl.handle.net/10986/28006The paper examines the challenges that developing countries face in accelerating and sustaining growth. The cases of China and India are examined to illustrate a more general phenomenon which might be called model uncertainty. As a developing economy grows, its market and regulatory institutions change and their capabilities increase. As a result, growth strategies and policies and the role of government shift. Further, as the models of economies in these transitional states are incomplete and because models used to predict policy impacts in advanced economies may not provided accurate predictions in the developing economy case, growth strategies and policies need to be responsive and to evolve as the economy matures. This has lead governments in countries that have sustained high growth to be somewhat pragmatic, to treat the policy directions that emerge from the advanced economy model with circumspection, to be somewhat experimental in seeking to accelerate export diversification, to be sensitive to risks, and as a result to proceed gradually in areas such as the timing and sequencing of opening up on the current and capital accounts. The last is an area in which existing theory provides relatively little specific guidance, but in which there are relatively high risks that decline over time as the market matures.en-USAll rights reservedACCUMULATION OF RESERVESADVANCED ECONOMIESADVANCED ECONOMYAGRICULTUREALLOCATION OF CAPITALANNUAL GROWTHASSET PRICEASSET PRICESASSETSBALANCE OF PAYMENTSBANKING SYSTEMBROKERAGEBROKERAGE FIRMSCAPITAL ACCOUNTCAPITAL ACCOUNTSCAPITAL ACCUMULATIONCAPITAL CONTROLSCAPITAL FLOWSCAPITAL FORMATIONCAPITAL INFLOWSCAPITAL MARKETCAPITAL MARKET DEVELOPMENTCAPITAL MARKETSCAPITAL OUTFLOWSCENTRAL BANKCENTRAL BANK INDEPENDENCECENTRAL BANKSCENTRALLY PLANNED ECONOMYCLARITYCOMPARATIVE ADVANTAGECOMPETITIVENESSCONSUMERSCREDIBILITYCROSS-BORDER FLOWSCURRENCY CRISESCURRENT ACCOUNTCURRENT ACCOUNT SURPLUSESDEBTDECENTRALIZATIONDECISION MAKINGDEFICITSDEPOSITSDEREGULATIONDEVELOPING COUNTRIESDEVELOPING COUNTRYDISCOUNT RATEDOMESTIC BANKINGDOMESTIC CONSUMPTIONDOMESTIC DEMANDDOMESTIC ECONOMYDOMESTIC FINANCIAL MARKETSDOMESTIC INFLATIONDOMESTIC PRICESDURABLEDURABLE ASSETECONOMIC DEVELOPMENTECONOMIC GROWTHECONOMIC OUTCOMESECONOMIC PERFORMANCEECONOMIC THEORYEMERGING ECONOMIESENFORCEABILITYEXCHANGE RATEEXCHANGE RATE MANAGEMENTEXCHANGE RATE POLICYEXCHANGE RATESEXPORT COMPETITIVENESSEXPORT DIVERSIFICATIONEXPORTSEXPOSUREEXTERNAL INVESTORSEXTERNAL SHOCKSFINANCESFINANCIAL CRISISFINANCIAL FLOWSFINANCIAL INSTITUTIONFINANCIAL MARKETFINANCIAL MARKETSFINANCIAL SECTORFINANCIAL STABILITYFINANCIAL SYSTEMFISCAL POLICIESFLEXIBLE EXCHANGE RATESFOOD PRICESFOREIGN CAPITALFOREIGN CURRENCYFOREIGN DIRECT INVESTMENTFOREIGN INVESTMENTFOREIGN INVESTORSFOREIGN RESERVESGDPGDP PER CAPITAGLOBAL DEMANDGLOBAL ECONOMYGLOBAL MARKETSGLOBAL PRIVATE SECTORSGOVERNMENT DEBTGOVERNMENT DEBT MARKETSGOVERNMENT POLICIESGROSS CAPITAL FORMATIONGROWTH MODELSGROWTH PERFORMANCEGROWTH POLICIESGROWTH RATEHEDGE FUNDSHIGH INFLATIONHOLDINGHUMAN CAPITALHUMAN RESOURCESIMPORTIMPORT TARIFFIMPORTSINCOMEINCOME GROWTHINCOME INEQUALITYINCOME LEVELSINDUSTRIALIZATIONINFLATIONINFLATIONARY IMPACTINFORMATION TECHNOLOGYINFRASTRUCTURE INVESTMENTINSTITUTIONAL DEVELOPMENTINSURANCEINTANGIBLEINTANGIBLE ASSETSINTEREST RATESINTERNATIONAL BANKINTERNATIONAL DEVELOPMENTINTERNATIONAL ECONOMICSINTERNATIONAL FINANCIAL INSTITUTIONSINTERNATIONAL TRADEINVESTINGINVESTMENT PROCESSINVESTMENT RATEINVESTMENT RATESINVESTMENT RISKJUDICIAL INSTITUTIONSLABOR MARKETLABOR MARKETSLIBERALIZATIONLOSS OF COMPETITIVENESSMACROECONOMIC ENVIRONMENTMACROECONOMIC MODELSMARGINAL PRODUCTMARKET ECONOMIESMARKET ECONOMYMARKET EFFICIENCYMARKET ENVIRONMENTMARKET MECHANISMSMARKET PRESSUREMARKET PRICESMARKET REFORMMARKET STABILITYMATURE MARKETMATURITYMODERN FINANCIAL SYSTEMMONETARY POLICYOPEN ECONOMYOPEN MARKETOPPORTUNITY COSTOPPORTUNITY COSTSPER CAPITA INCOMEPHYSICAL ASSETSPOLICY RESPONSEPOLITICAL ECONOMIESPOLITICAL ECONOMYPOLITICAL RISKSPORTFOLIOPOSTWAR PERIODPOTENTIAL OUTPUTPOVERTY REDUCTIONPOVERTY REDUCTIONSPRICE CHANGESPRICE FORMATIONPRICE INFLATIONPRIVATE CAPITALPRIVATE CAPITAL INFLOWSPRIVATE EQUITYPRIVATE SECTOR INVESTMENTPRODUCTIVE ASSETSPUBLIC INVESTMENTPUBLIC SPENDINGRAPID GROWTHREAL GDPREGULATORY STRUCTUREREGULATORY SYSTEMSRELATIVE PRICERELATIVE PRICESRESERVERESERVE ACCUMULATIONRESERVESRETAIL INVESTORSRETURNRETURNSREVALUATIONSAVINGS RATESAVINGS RATESSECURITIESSECURITIES LAWSSHAREHOLDERSOCIAL MARGINAL COSTSTRUCTURAL CHANGESTRUCTURAL PROBLEMSUPPLY CURVESURPLUSSURPLUS LABORTANGIBLE ASSETSTARIFFS ON IMPORTSTAXTAX POLICYTAX PROVISIONSTECHNICAL ASSISTANCETIME HORIZONSTRADE SURPLUSUNCERTAINTIESUNCERTAINTYWAGESWEALTHWITHDRAWALWTOWorking PaperNTC Economic & Financial Publishing10.1596/28006