Full Report - Subregional Office for East and North-East Asia - escap

DEVELOPMENTAL MACROECONOMICS: THE CRITICAL ROLE OF PUBLIC EXPENDITURE CHAPTER 3
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DEVELOPMENTAL MACROECONOMICS:
THE CRITICAL ROLE OF PUBLIC EXPENDITURE
The main challenge today is… resolving long-term
development tasks, and whether we can continue a policy
that will pull the global economy out of stagnation and
uncertainty and set it on a steady growth track.
Vladimir Putin,
President of the Russian Federation
Macroeconomic policies in successful developing countries primarily
focused on economic growth, subject to the constraint that inflation
remained tolerable and that the balance of payments remained
manageable. However, the breakdown of the Bretton Woods
system of fixed exchange rates and the oil price shocks in the
1970s and the subsequent debt crisis in Latin America provoked a
shift in macroeconomic policy and the role of the State in which
managing public finances and keeping inflation under check were
considered both a necessary and sufficient condition for growth and
for achieving poverty reduction. However, this has led to neglect of
the developmental role of macroeconomic policies.
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