BIS central bankers’ speeches  1  to address the distortions and constraints could in practice result in short-term costs, in particular if local circumstances are not well understood. If however approached judiciously, it should yield positive results over the medium to longer term. It was against this background that Hausmann, Rodrik and Velasco developed their approach to identifying binding constraints to growth.
Important lessons from this and other research were that development policy is country specific rather than being one-size-fits-all and that sometimes large positive welfare impacts could be achieved by optimally sequencing just a few reforms to relax binding constraints. Empirical evidence also showed that in every country structural transformation and economic diversification are required to achieve significant income growth and poverty reduction.