Growth, Macroeconomics, and Development
AbstractThe 1980s were both the lost decade of growth for much of Latin America and Africa, and the period in which -- through the new growth theory -- macroeconomists returned to the study of growth and development. The new growth theory is production function driven and concerned primarily with steady states, and has paid little attention to the role of macroeconomic policy -- as reflected for instance in the rate of inflation and the budget deficit -- in determining growth. This paper presents a variety of evidence that macroeconomic policies matter for long-run growth. First, macroeconomic variables enter the typical new growth theory cross-country regressions with statistical significance and the expected signs. Second, evidence from large multi?country case studies, and from case-studies of Chile and Cote d'Ivoire presented in the paper, shows that macroeconomic policy choices have had a significant impact on growth over periods of more than a decade. The conclusion is that macroeconomic policy choices, including the budget deficit, the exchange rate system, and those choices that determine the inflation rate, matter for long-term economic growth.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3702.
Date of creation: May 1991
Date of revision:
Publication status: published as Stanley Fischer. "Growth, Macroeconomics, and Development," in Olivier Jean Blanchard and Stanley Fischer, editors, "NBER Macroeconomics Annual 1991, Volume 6" MIT Press (1991)
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