Forward-looking Macroeconomic Policies – Re-examining Inflation and Debt Limits

The world leaders gathered at the UN Conference on Sustainable Development (referred to as Rio+20) called for “adopting forward-looking macroeconomic policies that promote sustainable development and lead to sustained, inclusive and equitable economic growth…” (para. 150). This is, in fact, a reaffirmation of their call for the same at the 2010 High-level Plenary Meeting of the United Nations General Assembly (commonly known as MDGs Summit) (para. 23b). What then are “forward-looking” macroeconomic policies? The answer can be found in the UN Secretary-General’s report, Keeping the Promise,1 for the 2010 MDGs Summit. Paragraph 50 of the Report states, “Macroeconomic policies should not focus narrowly on debt stabilization and curbing inflation, but should ultimately be supportive of growth of real output and employment. It is often necessary, therefore, to relax unnecessarily stringent fiscal and monetary restrictions and to use countercyclical fiscal and monetary policies to boost employment and incomes and to minimize the impact of external and other shocks on poverty. This requires countries to strengthen mobilization of domestic resources and adopt mechanisms that promote countercyclical policy responses. Enhanced international cooperation to strengthen tax revenue collection and increase sovereign debt sustainability can greatly buttress the fiscal capacities of all Governments.”