Book contents
- Frontmatter
- Contents
- Illustrations
- Abbreviations
- Foreword
- Preface and Acknowledgments
- Executive Summary
- Chapter 1 What Is Inclusive Growth?
- Chapter 2 What Is the Main Constraint that Developing Countries Face?
- Chapter 3 Why Full Employment and Who Should Be Responsible for Trying to Achieve It?
- Chapter 4 Why Is Growth Unstable?
- Chapter 5 What Is the Role of Agriculture in the Process of Structural Change and in Delivering Full Employment? Full Employment I
- Chapter 6 What Is the Role of Investment in Delivering Full Employment? Full Employment II
- Chapter 7 Why Is “Planning Development” Necessary?
- Chapter 8 What Is Industrial Policy? Full Employment III
- Chapter 9 Structural Transformation, Industrialization, and Technological Change in Developing Asia: What Does the Empirical Evidence Show?
- Chapter 10 Why Do Export Diversification and Sophistication Matter?
- Chapter 11 Unemployment Versus Inflation: Which One Should Be the Public Enemy Number One?
- Chapter 12 What Should Be the Role of Fiscal and Monetary Policies for Development? Full Employment IV
- Chapter 13 Is It Possible to Achieve Full Employment in the Presence of Structural Transformation?
- Chapter 14 Should the Government (Public Sector) Intervene Directly and Become the Employer of Last Resort? Full Employment V
- Chapter 15 Can Competitiveness and Globalization Deliver Inclusiveness and Full Employment?
- Chapter 16 Export-Led Growth or Domestic Demand–Led Growth?
- Chapter 17 Is Education a Key Ingredient of Inclusive Growth?
- Chapter 18 Conclusions: How Can Developing Countries Implement an Inclusive-Growth and Full-Employment Strategy?
- References
- Author Index
- Subject Index
Chapter 12 - What Should Be the Role of Fiscal and Monetary Policies for Development? Full Employment IV
- Frontmatter
- Contents
- Illustrations
- Abbreviations
- Foreword
- Preface and Acknowledgments
- Executive Summary
- Chapter 1 What Is Inclusive Growth?
- Chapter 2 What Is the Main Constraint that Developing Countries Face?
- Chapter 3 Why Full Employment and Who Should Be Responsible for Trying to Achieve It?
- Chapter 4 Why Is Growth Unstable?
- Chapter 5 What Is the Role of Agriculture in the Process of Structural Change and in Delivering Full Employment? Full Employment I
- Chapter 6 What Is the Role of Investment in Delivering Full Employment? Full Employment II
- Chapter 7 Why Is “Planning Development” Necessary?
- Chapter 8 What Is Industrial Policy? Full Employment III
- Chapter 9 Structural Transformation, Industrialization, and Technological Change in Developing Asia: What Does the Empirical Evidence Show?
- Chapter 10 Why Do Export Diversification and Sophistication Matter?
- Chapter 11 Unemployment Versus Inflation: Which One Should Be the Public Enemy Number One?
- Chapter 12 What Should Be the Role of Fiscal and Monetary Policies for Development? Full Employment IV
- Chapter 13 Is It Possible to Achieve Full Employment in the Presence of Structural Transformation?
- Chapter 14 Should the Government (Public Sector) Intervene Directly and Become the Employer of Last Resort? Full Employment V
- Chapter 15 Can Competitiveness and Globalization Deliver Inclusiveness and Full Employment?
- Chapter 16 Export-Led Growth or Domestic Demand–Led Growth?
- Chapter 17 Is Education a Key Ingredient of Inclusive Growth?
- Chapter 18 Conclusions: How Can Developing Countries Implement an Inclusive-Growth and Full-Employment Strategy?
- References
- Author Index
- Subject Index
Summary
None of the post war expansions died of old age. They were all murdered by the Fed.
—R. Dornbusch, late Massachusetts Institute of Technology professor (quoted in The Economist [2007, 76]).In this chapter, I discuss the roles of fiscal and monetary policies in achieving full employment. These two are the main tools that governments have at hand to achieve this objective. I start with a discussion of fiscal policy and budget deficits and address the widely held belief that budget deficits cause inflation, lead to increases in interest rates, and crowd out private investment. I move in the following section to a discussion of monetary policy and the evidence of the role of interest rates in stimulating investment and averting inflation. In this chapter, I argue that governments and central banks have powerful tools to contribute to full employment. In fact, failure to understand how these tools operate in modern economies is an important reason for pervasive involuntary unemployment.
For a long time, economists have distinguished between policies for stabilization (short- and medium-term issues) and policies for growth (long-term issues). The tools to stabilize the economy (i.e., to counteract economic fluctuations) are monetary and fiscal policies that focus on aggregate demand. Some economists think that these have no impact on long-run growth (i.e., the neutrality-of-money proposition).
- Type
- Chapter
- Information
- Inclusive Growth, Full Employment, and Structural ChangeImplications and Policies for Developing Asia, pp. 189 - 226Publisher: Anthem PressPrint publication year: 2010