Journal Article

IDS Bulletin Vol. 39 Nos. 2

A Macroeconomic Framework for Growth and Employment Generation

Published on 1 May 2008

Many low-income countries have achieved macroeconomic stability in the recent past, and are currently experiencing moderate, in some cases fast, economic growth.

In this new context, these countries are facing the challenge of how to accelerate growth and how to macro-manage the economy to ensure that faster growth can be maintained over time. A related challenge is how to strive for a growth pattern that is pro-employment creation, so that it is more inclusive and thus truly sustainable.

Recent work has shown that low-income countries have macroeconomic frameworks that have been designed to support mainly macroeconomic stability, with very few elements to support growth directly (IEO 2007; Gottschalk 2005, 2008). These frameworks include tight monetary policy linked to too low inflation targets, fiscal policy that fails to support capital expenditure for supply capacity expansion, and lack of an exchange rate regime that clearly prioritises export competitiveness. The main problem with these policies is that they constrain countries’ ability to support fast growth. They are clearly inappropriate, particularly at a time when low-income countries seek faster growth to meet the Millennium Development Goals (MDGs). This IDS Bulletin article proposes a macroeconomic framework that is better aligned with low-income countries’ quest for faster growth, a framework that has internal coherence and that does not constrain structural or other policies for growth and employment creation.

Related Content

This article comes from the IDS Bulletin 39.2 (2008) A Macroeconomic Framework for Growth and Employment Generation

Cite this publication

Gottschalk, R. (2008) A Macroeconomic Framework for Growth and Employment Generation. IDS Bulletin 39(2): 104-111

Authors

Ricardo Gottschalk

Publication details

published by
Institute of Development Studies
authors
Gottschalk, Ricardo
doi
10.1111/j.1759-5436.2008.tb00451.x

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