Does Policy Consistency Affect Economic Growth?
In the long run, nations prosper, in the sense of higher per-capita incomes, lower unemployment, lower poverty levels, and so on, the fewer the impediments are to steadily higher productivity, along with growing productive capacity to take advantage of the productivity growth. In large parts of the world today, however, the business environment is characterized by an extent of uncertainty that is unprecedented over the past several decades. The main reason is lack of clarity in economic policy making. In order to be properly informed and well founded, growth-promoting decisions, such as innovative activity, investment in new productive capacity, choice of new markets, and so on, require an assessment—an expectation—of the policy environment years into the future. Important policy dimensions are tax policy, spending and debt policy, extent of trade restrictions, and the regulatory environment in general.
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