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Mr. Alejandro Izquierdo, Ward Brown, Mr. Brian Ames, and Shatayanan Devarajan

Abstract

Poverty is a multidimensional problem that goes beyond economics to include, among other things, social, political, and cultural issues (see Box 1). Therefore, solutions to poverty cannot be based exclusively on economic policies, but require a comprehensive set of well-coordinated measures. Indeed, this is the foundation for the rationale underlying comprehensive poverty reduction strategies.1 So why focus on macroeconomic issues? Because economic growth is the single most important factor influencing poverty, and macroeconomic stability is essential for high and sustainable rates of growth.2 Hence, macroeconomic stability should be a key component of any poverty reduction strategy.

Mr. Alejandro Izquierdo, Ward Brown, Mr. Brian Ames, and Shatayanan Devarajan

Abstract

Economic growth is the single most important factor influencing poverty. Numerous statistical studies have found a strong association between national per capita income and national poverty indicators, using both income and nonincome measures of poverty.5 One recent study consisting of 80 countries covering four decades found that, on average, the income of the bottom one-fifth of the population rose one-for-one with the overall growth of the economy as defined by per capita GDP (Dollar and Kraay, 2000). Moreover, the study found that the effect of growth on the income of the poor was on average no different in poor countries than in rich countries, that the poverty–growth relationship had not changed in recent years, and that policy-induced growth was as good for the poor as it was for the overall population. Another study that looked at 143 growth episodes also found that the “growth effect” dominated, with the “distribution effect” being important in only a minority of cases (White and Anderson, forthcoming). These studies, however, establish association, but not causation. In fact, the causality could well go the other way. In such cases, poverty reduction could in fact be necessary to implement stable macroeconomic policies or to achieve higher growth.

Mr. Alejandro Izquierdo, Ward Brown, Mr. Brian Ames, and Shatayanan Devarajan

Abstract

Broadly speaking, two considerations underlie macroeconomic policy recommendations. First, there needs to be an assessment of the appropriate policy stance to adopt in a given set of circumstances (i.e., should fiscal and/or monetary policy be tightened or loosened?). Second, there is the choice of specific macroeconomic policy instruments that would be beneficial for a country to adopt (e.g., the use of a nominal anchor, a value-added tax (VAT), etc.). In practice, these two considerations are closely linked. Adjusting a policy stance is often done via the adoption of a new instrument (or the modification of an existing one). More important, both considerations are essential to efforts to enhance an economy’s stability.

Mr. Alejandro Izquierdo, Ward Brown, Mr. Brian Ames, and Shatayanan Devarajan

Abstract

Since the emphasis of this pamphlet is on the role of macroeconomic policy in supporting a country’s poverty reduction strategy, the discussion of macroeconomic policies in this section focuses on countries that have broadly achieved macroeconomic stability. Recent data indicate that many developing countries are presently in a state of macroeconomic stability (see Tables 1–3 at the end of this pamphlet). When formulating a country’s poverty reduction strategy, policymakers will need to assess and determine what is the most appropriate combination of key macroeconomic targets that would preserve macroeconomic stability in their particular circumstance. Three key issues are discussed in this section: (1) how to finance poverty-reducing spending in a way that doesn’t endanger macroeconomic stability; (2) what specific policies can be adopted to improve macroeconomic performance; and (3) policies to protect the poor from domestic and external shocks.

Mr. Alejandro Izquierdo, Ward Brown, Mr. Brian Ames, and Shatayanan Devarajan

Abstract

This pamphlet excerpts a chapter on macroeconomic policy from the Poverty Reduction Policy Source book, a guide prepared by the World Bank and IMF to assist countries in developing and strengthening their poverty reduction strategies. It probes the relationship between macroeconomic policy matters, such as growth and inflation, and the fight against poverty, and explains how sound monetary and fiscal policies-key tools of the macroeconomist-can help to spur growth and ease poverty.

R.D. Asante, Paul Robert Masson, and Jacqueline Lrving

For the latest thinking about the international financial system, monetary policy, economic development, poverty reduction, and other critical issues, subscribe to Finance & Development (F&D). This lively quarterly magazine brings you in-depth analyses of these and other subjects by the IMF’s own staff as well as by prominent international experts. Articles are written for lay readers who want to enrich their understanding of the workings of the global economy and the policies and activities of the IMF.

International Monetary Fund
This report reviews the work of the Fund since the 2007 Spring Meetings and the priorities for the period ahead. Progress has been made in the past few months with respect to the framework for surveillance and its implementation, quota and voice, and the Fund’s income model. Other key aspects of the MTS have also advanced, including with regard to Bank-Fund collaboration and the Fund’s role in low-income countries. Future work will focus on completion of the quota and voice reform, reaching agreement on the Fund’s new income model, and delivering budgetary restraint, as well as addressing the evolving challenges facing the Fund and the world economy, notably the financial market turbulence and financial globalization. The paper reports on recent developments in the global economy (Section II) and progress in the following key areas: reshaping surveillance (Section III); emerging market economies and crisis prevention (Section IV); the role of the Fund in low-income countries (Section V); quota and voice issues (Section VI), building institutions and capacity (Section VII); and managing an effective institution (Section VIII).
International Monetary Fund

This study focused on the medium-term objectives, the 2004 government budget, and other policies and measures for the program period. The preparation of a full Poverty Reduction Strategy Paper (PRSP) will play a crucial role in the process, as this would provide a road map for the government's medium-term efforts. Sierra Leone's poverty reduction efforts would be significantly assisted by a medium- to long-term framework to develop the mineral sector. The IMF staff discussed with the authorities ways to achieve the monetary targets under the program.