Macroeconomic Policy and Poverty

Slower growth and higher inflation can worsen poverty. By implication, maintaining macroeconomic stability is necessary to reduce poverty. When a typical aggregate demand policy for stabilization is not effective, however, its impact on poverty could be devastating as incomes of the poor typically decline with falling output. This study argues that when poverty reduction is included in welfare objectives, it is imperative that policymakers weigh the impact of macroeconomic policy on the poverty line and household incomes. The author addresses this issue by exploring the theoretical and empirical link between output, price, poverty line, and household incomes, and juxtaposes them with their combined effect on poverty. Central to the argument is the premise that neither growth itself nor stability as such is the answer to poverty reduction.

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1. Ruly
   (posted 11 July 2008 / 02:08:15 PM)
   
   This paper gives me a new insight about the real condition of my country economy, and how the authority (government) had applied many conventional economic policies, which is not suitable for Indonesian economy that has different characters and conditions from the west, the origin of these conventional policies..
   
   Furthermore, I was very lucky because the author presented this paper in my class as a guess lecturer about 2 months ago. For the first time after 1.5 years studying economics, a lot of my "unanswered" questions being answered, and I even didn't have to ask..