Macroeconomic policies in developing countries

Abstract

The global economic crisis has created an opportunity to rethink macroeconomics for development. Such rethinking is both necessary and desirable. It is essential to redefine macroeconomic objectives so that the emphasis is on fostering employment creation and supporting economic growth instead of the focus on price stability alone. It is just as important to rethink macroeconomic policies which cannot simply be used for the management of inflation and the elimination of macroeconomic imbalances, since fiscal and monetary policies are powerful and versatile instruments in the pursuit of development objectives. In doing so, it is essential to the overcome the constraints embedded in orthodox economic thinking and recognize the constraints implicit in the politics of ideology and interests. Macroeconomic policies concern the way the public administration, the state, can influence the economy, processes and economic phenomena. Macroeconomics was developed in, and for, the industrialized countries. Therefore, theories and policies were both concerned with how monetary and fiscal policies should be used in those economies and what might be expected of such policies in terms of obtaining full employment, controlling inflation or stabilizing economic activity. This accumulation of knowledge, with its competing schools of thought, is to be used in developing countries and without any significant modification. It is by no means clear that such application is either justified or appropriate. JEL: B22, E00, E60, E62, N10.