Structural factors include terms of trade, external capital flows, and trade policy, plus other factors relevant to the circumstances of individual countries. The implied change in the medium-term equilibrium real rate is compared with that of a historical reference period. The application of this methodology to two developing countries, the Philippines and Tanzania, illustrates how it can complement and improve upon other analytic approaches, such as those using purchasing power parity and analysis of parallel rates. This approach is complemented by an analysis of the relation between a country's real exchange rate and those of its major competitors. Policy Reform Brian Levy Countries vary in their political commitment to change and in the capability of their bureaucracies.
Policies vary in their organizational and political demands.
These institutional variations can be incorporated into the design of trade and investment policy reform. But there is no single approach, common across countries, through which trade policy reform should proceed. Countries with weak administrative capabilities should push import liberalization to the limits. But politically constrained countries with a stronger administrative capability might consider roundabout reforms that secure outward orientation without full-scale, prior import liberalization.