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.
by Michael W. Bell
Macroeconomic Policy Series