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It
is commonplace today to hear many observers and policymakers
decrying stabilisation as both ‘bad’ and inimical
to growth. The perception has clouded important issues and,
in key instances, frustrated the formulation of economic
policies appropriate for self-sustaining growth. In my remarks
today, I intend to argue that (i) stabilisation is usually
a prerequisite to growth; (ii) stabilisation policy must
be visibly credible to be effective; (iii) it is non-credible
stabilisation that is either self-defeating or increases
the costs of adjustment; and (iv) elements of a credible
policy are well known, usually require greater attention
to the quality of fiscal adjustment, an should guide adjustment
policy.
Table of Contents
- Why Stabilize?
- A Framework for Stabilisation
- Credible Versus Non-Credible Stabilisation
- Conclusions
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