TY - JOUR AU - Asturias, Jose AU - Hur, Sewon AU - Kehoe, Timothy J AU - Ruhl, Kim J TI - The Interaction and Sequencing of Policy Reforms JF - National Bureau of Economic Research Working Paper Series VL - No. 21840 PY - 2016 Y2 - January 2016 DO - 10.3386/w21840 UR - http://www.nber.org/papers/w21840 L1 - http://www.nber.org/papers/w21840.pdf N1 - Author contact info: Jose Asturias Georgetown University SFS-Q Education City P.O. Box 23689 Doha, Qatar E-Mail: jga35@georgetown.edu Sewon Hur Federal Reserve Bank of Cleveland Research Department 1455 E 6th St Cleveland, OH 44114 E-Mail: sewonhur@gmail.com Timothy J. Kehoe University of Minnesota Department of Economics 1925 Fourth Street South Minneapolis, MN 55455-0462 Tel: 612/625-1589 Fax: 612/204-5515 E-Mail: tkehoe@umn.edu Kim J. Ruhl Department of Economics University of Wisconsin-Madison 7444 Social Science Building 1180 Observatory Drive Madison, WI 53706 E-Mail: ruhl2@wisc.edu AB - In what order should a developing country adopt policy reforms? Do some policies complement each other? Do others substitute for each other? To address these questions, we develop a two-country dynamic general equilibrium model with entry and exit of firms that are monopolistic competitors. The model includes barriers to entry of new firms, barriers to international trade, and barriers to contract enforcement. We find that the same reform can have very different effects on other economic outcomes, depending on the types of distortions present. In our model, we find that reforms to trade barriers and barriers to the entry of new firms are substitutable, as are reforms to contract enforcement and trade barriers. In contrast, we find that reforms to contract enforcement and the barriers to entry are complementary. Finally, the optimal sequence of reforms requires reforming trade barriers before contract enforcement. ER -