at once (a strategy sometimes associated with the Washington Consensus approach) - often an infeasible option due to financial and capacity constraints, especially in low- income countries. But targeting the biggest distortion or a number of distortions may not lead to a welfare improvement, because of the possibility of large second best effects.
It is against this background that Hausmann, Rodrik, and Velasco (HRV) (2005) develop a heuristic approach to identifying the most binding constraint to growth, i.e., the one with the largest shadow price so as to increase the chance of a positive welfare effect. They use a decision tree framework based on the “Euler equation” or “Keynes-Ramsey rule” which captures many of the most important factors affecting growth of an economy in the short-run:15