Macroeconomic and Development Policies

It is nowadays widely accepted that a stability oriented macroeconomic policy is a necessary condition for development and for achieving and sustaining high levels of development. There is, however, less agreement on the focus, intensity and sequencing of these stability-oriented policies: for example, while most would put the target of low inflation first, others would accept a degree of flexibility in public finances in order to cope with recessions or structural change. It seems that the stabilisation policies proposed by the Bretton Woods institutions have often not met with success and sometimes even worsened the economic conditions of developing countries. At present, these policies are being reoriented on the poverty reduction target. In this context, EMPANALYSIS work will analyse the rationale behind an integration of "employment goals" in the PRSP process, and the necessary macroeconomic policies required in order to achieve this goal. The design and advocacy of employment-focussed macroeconomic policies is a core element of the Global Employment Agenda.

While EMP/ANALYSIS has not the means to engage in a full scale country-by-country screening of the most adequate macroeconomic policies for promoting the ILO's goal of employment and decent work, it will contribute to this debate through cross-country analysis, and look into questions like the room for manoeuvre in national macroeconomic policy in developing countries, the avoidance of the "stabilization trap", the contribution that an appropriate macroeconomic policy can make to poverty reduction and employment creation, and more generally, the possibilities and limits of expansionary macroeconomic policies.

It will also contribute to the analytical and policy discussion regarding poverty-employment relationships, and will analyse, in particular, the interactions between macroeconomic policy and labour market policies.

Further work will also contribute to related debates on development, especially in showing the relationship between growth, employment and poverty.