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The Macro Content of PRSPs: Assessing the Need for a More Flexible Macroeconomic Policy Framework
Author(s) -
Gottschalk Ricardo
Publication year - 2005
Publication title -
development policy review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.671
H-Index - 61
eISSN - 1467-7679
pISSN - 0950-6764
DOI - 10.1111/j.1467-7679.2005.00295.x
Subject(s) - economics , fiscal policy , volatility (finance) , price of stability , macroeconomics , inflation (cosmology) , monetary policy , macro , flexibility (engineering) , poverty , monetary economics , poverty reduction , exchange rate flexibility , commodity , international economics , finance , economic growth , exchange rate regime , physics , management , theoretical physics , computer science , programming language
This article analyses the content of 15 Poverty Reduction Strategy Papers from a growth and poverty reduction perspective. Contrary to new trends in developed and middle‐income countries, their policy frameworks lack the necessary flexibility to deal with external shocks and address macroeconomic volatility appropriately. Their fiscal and monetary policies are too narrowly focused on fiscal balance and price stability and consequently pay too little attention to economic fluctuations arising from external shocks, which have major effects on poverty and growth. To address these issues, the article proposes a set of policy measures, including avoidance of excessively tight inflation and fiscal targets (with provisions for fluctuations in commodity prices), more room for countercyclical policy and the adoption of permanent safety nets.