Macroeconomic Policy and Employment: A Development Perspective
- 37 Downloads
The present paper questions the conventional framework of macroeconomic policies where their primary role is to ensure macroeconomic stability which, in turn, is expected to ensure economic growth and employment. Using empirical evidence on countries of South Asia, it shows that the relationships between economic growth, inflation and budget deficit do not always support the conventional framework. The paper points out that some developed countries, e.g., the USA, have legislated the dual mandate of maintaining price stability and full employment for their monetary policy, and take the labour market situation into account in formulating such policies. In contrast, countries of South Asia seem to be guided more by inflation than by considerations of growth and employment. The paper argues that in developing countries, the notion of full employment cannot be conceptualized in the same way as in developed countries. In such cases, monetary policy would have to be informed by in-depth analysis of the employment and labour market situation. In fiscal policy, the effectiveness of different instruments (e.g., tax rates, and government expenditures) in boosting employment varies. Hence, the choice should be guided by the size of the fiscal multiplier. Experience indicates that public expenditure, especially on infrastructure, should have a greater impact on employment compared to tax reduction.
KeywordsEconomic growth Macroeconomic policy Monetary policy Inflation Fiscal policy Employment
- Adams, F. Gerard and Byron Gangnes. 2010: “Why hasn’t the US economic stimulus been more effective? The debate on tax and expenditure multipliers”. Working Paper no. 2010–2010, The Economic Research Organisation at the University of Hawaii, Honolulu.Google Scholar
- Asian Development Bank (various years). Asian development outlook, various years. ADB, Manila.”.Google Scholar
- Bangladesh Bank (various years). Bangladesh bank quarterly. https://www.bb.org.bd/pub/publictn.php. Accessed 18 Oct 2017.
- Bernanke, Ben S. 2015. The courage to act: A memoir of a crisis and its aftermath. London, New York: W. W. Norton & Company.Google Scholar
- Beveridge, Sir William. 1944. Full employment in a free society: A summary. The new statesman and nation and Reynolds news, London. (A summary of the report under the same title published by George Allen and Unwin Ltd., London).Google Scholar
- Bhattacharyya, Nikhilesh. 2012. Monetary policy and employment in developing Asia. ILO Asia-Pacific Working Paper Series, ILO, Bangkok.Google Scholar
- Blanchard, O., G. Dell’Ariccia, and P. Mauro. 2010. Rethinking macroeconomic policy. IMF Staff Position Note, SPN/10/03. IMF, Washington, DC.Google Scholar
- Blinder, Alan S., and Mark Zandi. 2010. Stimulus worked. Finance and development, December 2010, pp. 14–17.Google Scholar
- Chandrasekhar, C. P. 2016. Macroeconomic policy, employment and decent work in India. In Employment working paper no. 205, ILO, Geneva.Google Scholar
- Chandrasekhar, C.P., and Jayati Ghosh. 2008. Employment and the pattern of growth. In Economic development in India, ed. Raj Kapila and Uma Kapila. Delhi: Academic Foundation.Google Scholar
- Chowdhury, Anis. 2005. Thematic report on the macroeconomics of poverty reduction. Colombo: UNDP Regional Centre.Google Scholar
- Dasgupta, Sukti and Kee Beom Kim. 2011. Coordinated macroeconomic, employment and social protection policies in Asia and the Pacific. In ILO Asia-Pacific working paper series, ILO, Bangkok.Google Scholar
- Government of Bangladesh, Ministry of Finance (various years). Bangladesh Economic Review. Dhaka.Google Scholar
- International Institute for Labour Studies (IILS). 2012. World of work report 2012: Better jobs for a better economy. Geneva: ILO.Google Scholar
- International Labour Organization. 2009. Towards an Employment Strategy for India. ILO, New Delhi. http://www.ilo.org/wcmsp5/groups/public/—asia/—ro-bangkok/—sro-new_delhi/documents/genericdocument/wcms_177078.pdf.
- ILO/World Bank. 2012. Inventory of policy responses to the financial and economic crisis: Joint synthesis report. Geneva and Washington, DC: ILO and World Bank.Google Scholar
- International Monetary Fund. 2013. Jobs and growth: Analytical and operational conditions for the fund. Washington, DC: IMF.Google Scholar
- Islam, Rizwanul. 2006. Fighting poverty: The development-employment link. Boulder, London: Lynn Rienner Publishers.Google Scholar
- Islam, Iyanatul. 2017a. Fiscal consolidation, growth and employment: international evidence and implications for India. Paper for the 59th annual conference of the Indian Society for Labour Economics, 16–18 December 2017, Thiruvananthapuram.Google Scholar
- Islam, Rizwanul. 2017b. Employment policy in developing countries with particular focus on economic crises and their aftermath. In Labour and development: essays in honour of Prof. T. S. Papola, ed. K.P. Kannan, Rajendra P. Mamgain, and Preet Rustagi, 63–103. New Delhi: Academic Foundation.Google Scholar
- Islam, Iyanatul and Anis Chowdhury. 2012. Fiscal austerity and the youth employment crisis. In Vox http://www.voxeu.org/debates/commentaries/fiscal-austerity-and-youth-employment-crisis.
- Islam, Iyanatul, and David Kucera (eds.). 2013. Beyond macroeconomic stability: Structural transformation and inclusive development. London, Geneva: Palgrave Macmillan and ILO.Google Scholar
- Islam, Rizwanul, Mustafa K. Mujeri and Zulfiqar Ali. 2011. Fiscal and policy space for crisis response with a focus on employment and labour market: A study of Bangladesh. Paper prepared for the ILO, Geneva.Google Scholar
- Khan, A.R. 2007. Asian experience on growth, employment and poverty: An overview with special reference to the findings of some recent case studies. Geneva, Colombo: ILO, UNDP.Google Scholar
- Krugman, Paul. 2008. Stimulus gone bad. International Herald Tribune, January 26–27.Google Scholar
- Mahmood, Hamid and Samia Khalid. 2013. Fiscal policy for growth and employment generation in Pakistan. Academic Research International, Vol. 4, No. 6, November 2013, pp. 372–381.Google Scholar
- McKinley, Terry. 2011a. Macroeconomic policy, growth and poverty reduction. New York: Palgrave.Google Scholar
- McKinley, Terry. 2011b. Introduction to macroeconomic policy, growth and poverty reduction. In McKinley (2011a).Google Scholar
- Muqtada, M. 2015. Challenges of price stability, growth and employment in Bangladesh: Role of the Bangladesh Bank. Employment Working Paper No. 169. ILO, Geneva.Google Scholar
- Muqtada, M. 2016. Macroeconomic stability and the challenges of growth and employment in South Asian countries: A synoptic review. Paper prepared for Institute of Human Development, Delhi.Google Scholar
- OECD. 2017. OECD employment outlook 2017. Paris: OECD.Google Scholar
- Reserve Bank of India. 2017. Handbook of statistics on Indian economy, Sept 2017. www.rbi.org.in. Accessed 18 Oct 2017.
- Stiglitz, Joseph. 2008. How to stop the downturn. International Herald Tribune, January 24.Google Scholar
- United Nations. Sustainable development knowledge platform: Sustainable development Goal 8. https://sustainabledevelopment.un.org/sdg8. Accessed 3 May 2018.
- Weeks, John. 2011. Macroeconomic policy for growth with reference to Africa South of Sahara. In McKinley (2011a).Google Scholar