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Background Paper on the IMF's Trade Restrictiveness Index

Krishna, Kala (2009): Background Paper on the IMF's Trade Restrictiveness Index.

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Abstract

This paper reviews the Funds Trade Restrictiveness Index (IMF-TRI). It has three parts. The �rst part describes what the IMF-TRI is and the data needed to computeit. This part also traces the history of usage and the debate on the use of the IMF-TRI within the fund. It draws on internal Fund documentation as well as interviews conducted by Ms. Tan at IEO and the consultant. It also includes a discussion of the key documents produced internally and commissioned from external sources by the Fund. The second part asks what a good measure should be. There is no one size fits all measure as trade restrictiveness is multi dimensional. However, there is no reason to rely on a single measure of trade restrictiveness to capture all these di-mensions. Depending on how comprehensive a measure is needed, one or a variety of measures may be deemed appropriate to look at. The strengths and weaknesses of the IMF-TRI are highlighted and existing measures briefly surveyed. The third part suggests that an approach based on work by James Anderson, Peter Neary, and Robert Feenstra (ANF-TRI), together with other indicators, be used by the IMF in the future. The approach is relatively flexible and can be used to construct a basic measure of trade restrictiveness or a variety of more comprehensive ones as described in this section. This approach has been implemented by a group of economists at or formerly at the World Bank(H.L. Kee, M. Olarrelanga, A. Nicata). The relevant indices are available online. The averages of some of these indices are being reported in the Global Monitoring Report (GMR) which is put out under the joint auspices of the Bank, Fund, WTO and UNCTAD, and has presumably been vetted by all of the above. This provides additional legitimacy for the Funds use of the index. Moreover, the Bank is committed to updating these indices annually for the GMR.

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