Macroeconomic government policies in reducing

Governments should have budgetary guidelines approved by their legislatures that prioritize and protect poverty-related programs during periods of crisis and provide a clear course of action that ensures access of the poor to basic social services during periods of austerity see Lustig, forthcoming.

Growth associated with progressive distributional changes will have a greater impact on poverty than growth that leaves distribution unchanged. Fiscal Adjustment A loose fiscal stance can put upward pressure on prices through two channels: Given that it is difficult to determine beforehand what the growth target should be, policymakers may wish to consider developing alternative macroeconomic scenarios that take into consideration possible variations in the rate of economic growth.

Macroeconomic stability by itself, however, does not ensure high rates of economic growth. Such scenarios could be usefully discussed with stakeholders and development partners with a view to assessing the impact of lower-than-projected economic growth on key macroeconomic targets and poverty outcomes and to developing appropriate contingencies.

Education and training to help reduce structural unemployment. While it may be relatively easy to identify a country in a state of macroeconomic instability e. While faster growth in agriculture may address rural poverty in the short-term, reliance on agricultural activity may also intensify output variability, which, in turn, would contribute to increasing rather than decreasing poverty.

During booms, some governments have decreased export commodity taxes, reduced revenue collection effort, or heavily increased expenditures, amplifying the effects of positive shocks.

Therefore, policies to achieve low and stable price in? When actions are undertaken to minimize economic fluctuations, it is known as discretionary fiscal policy.

Macroeconomic – Government Policies in Reducing Inflation and Unemployment

Automatic stabilizers use conventional fiscal mechanisms but take effect as soon as the economy takes a downturn: Keynesian ; Monetarist attitudes to monetary policy. The answers to these questions will determine the extent to which the desired poverty reduction programs can be pursued in the current period.

At best it will take several years to reduce unemployment. However, Keynesians argue crowding out will not occur in a liquidity trap.

Policymakers could then assess the new poverty reduction projects and activities that have been identified in the context of the poverty reduction strategy and integrate them into the preliminary spending program.

The role of government in an economy. Both monetary and fiscal policies have a significant impact on inflation. To the extent that some revenue provisions may be regressive, they should be offset through the expenditure system e. The effects of fiscal policy can be limited by crowding out.

Fiscal Policy

Hence, in addition to distorting trade and inhibiting growth, an overly appreciated exchange rate can impair the relative incomes and purchasing power of the poor. Policymakers should therefore define a set of attainable macroeconomic targets i.


Rather, there is a continuum of various combinations of levels of key macroeconomic variables e. This imposes an automatic discipline upon domestic monetary policy.

For example, a negative terms of trade shock can adversely affect bank liquidity by reducing demand for domestic deposits, forcing banks to curtail credit roll-over, spreading the shock throughout the economy IADB,and Hausmann, After a certain period, the government could guarantee a public sector job e.

The additional spending generated by the food stamps helps to soften the downturn for the individuals receiving the help, and also benefits the businesses and employees where the money is spent.

Structural fiscal reforms in budget and treasury management, public administration, governance, transparency, and accountability can also benefit the poor in terms of more efficient and better targeted use of public resources. The following section will indicate how the expansionary Fiscal and Monetary Policies impact price stability inflation rate: The industrial policies pursued by many African developing countries in the s have long been discredited World Bank, Fiscal policy may have time lags.

The appropriate mix and sequencing cannot, however, ensure that the adverse effects will be removed entirely and, hence, social safety nets are needed to mitigate possible short-run adverse effects on the poor.Fiscal policy is one of the macroeconomic policies which can influence resources allocation, redistribution income and reduce the fluctuation of the business cycle, by varying the amount of government spending and policy can decrease unemployment by helping to increase aggregate demand and the rate of economic growth.

US and UK were more successful in reducing unemployment after /09 recession. Demand side policies are critical when there is a recession and rise in cyclical unemployment.

(e.g. after recession and after recession) 1. Fiscal Policy Fiscal. Fiscal policy – changes to government taxation, government spending and borrowing; Supply-side policies designed to make markets work more efficiently; Objectives of UK Macroeconomic Policy.

The key objectives for the UK are: Stable low inflation - the Government’s inflation target is % for the consumer price index. Three key issues are discussed in this section: (1) how to finance poverty-reducing spending in a way that doesn’t endanger macroeconomic stability; (2) what specific policies can be adopted to improve macroeconomic performance; and (3) policies to protect the poor from domestic and external shocks.

This essay focuses on discussing the role of government policy on reducing unemployment and inflation in relation to Keynesian and Monetarist approaches, including examples of impacts of expansionary fiscal and monetary policies on New Zealand economy.

Macroeconomic Objectives and Macro Stability. Levels: AS, A Level; Exam This is in the hands of the government.

Macroeconomic – Government Policies in Reducing Inflation and Unemployment

Supply-side policies can also be used to control inflation and promote growth over the longer-term. Rising living standards and a fall in relative poverty – cutting child poverty and reducing pensioner poverty. Sound.

Macroeconomic government policies in reducing
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