Macroeconomic Stability and Inclusive Growth

Author/Editor:

Hamid R Davoodi ; Peter J Montiel ; Anna Ter-Martirosyan

Publication Date:

March 19, 2021

Electronic Access:

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

We survey the literature on the relationship between macroeconomic stability and inclusive growth and identify gaps in our knowledge. We examine the role of macroeconomic policies (fiscal, monetary, macroprudential, and exchange rate) and measures of inclusiveness (income inequality, consumption inequality, wealth inequality, poverty, and unemployment) across countries at different income levels. Avoiding procyclical macroeconomic policies and mitigating macroeconomic volatility should be on the agenda of all policymakers concerned with promoting inclusive growth. The emerging theory and evidence suggest a strong role for macroeconomic policies in shaping inclusive growth, both in the short-run and the long-run. The two-way relationship between the macroeconomy and inequality underscores the challenge of identifying and estimating causal relationships. Models with heterogeneous agents have much to offer in this area.

Series:

Working Paper No. 2021/081

Frequency:

regular

English

Publication Date:

March 19, 2021

ISBN/ISSN:

9781513574363/1018-5941

Stock No:

WPIEA2021081

Format:

Paper

Pages:

36

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