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Growth Oriented Macroeconomic Policies for Small Islands Economies: Lessons from Singapore

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  • Chowdhury, Anis
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    Abstract

    Most small island economies or ?microstates? have distinctly different characteristics from larger developing economies. They are more open and vulnerable to external and environmental shocks, resulting in high output volatility. Most of them also suffer from locational disadvantages. Although a few small island economies have succeeded in generating sustained rapid growth and reducing poverty, most have dismal growth performance, resulting in high unemployment and poverty. Although macroeconomic policies play an important role in growth and poverty reduction, there has been very little work on the issue for small island economies or microstates. Most work follows the conventional framework and finds no or very little effectiveness of macroeconomic policies in stabilization. They also concentrate on short-run macroeconomic management with a focus almost entirely on either price stability or external balance. The presumption is that price stability and external balance are prerequisite for sustained rapid growth. This paper aims to provide a critical survey of the extant literature on macroeconomic policies for small island economies in light of the available evidence on their growth performance. Given the high output volatility and its impact on poverty, this paper will argue for a balance between price and output stabilization goals of macroeconomic policy mix. Drawing on the highly successful experience of Singapore, it will also outline a framework for growth promoting, pro-poor macroeconomic policies for small island economies/microstates.

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    File URL: http://www.wider.unu.edu/stc/repec/pdfs/rp2008/rp2008-47.pdf
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    Bibliographic Info

    Paper provided by World Institute for Development Economic Research (UNU-WIDER) in its series Working Papers with number RP2008/47.

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    Length: 24 pages
    Date of creation: 2008
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    Handle: RePEc:unu:wpaper:rp2008-47

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    Keywords: Caribbean; Pacific Islands; fiscal policy; small open economies;

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    1. Chowdhury, Anis & McKinley, Terry, 2007. "Gearing Macroeconomic Policies to Manage Large Inflows of ODA: The Implications for HIV/AIDS Programmes," Working Papers UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
    2. Streeten, Paul, 1993. "The special problems of small countries," World Development, Elsevier, vol. 21(2), pages 197-202, February.
    3. Laplagne, Patrick & Treadgold, Malcolm & Baldry, Jonathan, 2001. "A Model of Aid Impact in Some South Pacific Microstates," World Development, Elsevier, vol. 29(2), pages 365-383, February.
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    5. Glewwe, Paul & Hall, Gillette, 1998. "Are some groups more vulnerable to macroeconomic shocks than others? Hypothesis tests based on panel data from Peru," Journal of Development Economics, Elsevier, vol. 56(1), pages 181-206, June.
    6. Milner, Chris & Westaway, Tony, 1993. "Country size and the medium-term growth process: Some cross-country evidence," World Development, Elsevier, vol. 21(2), pages 203-211, February.
    7. Vlad Pavlov & Craig Sugden, 2006. "Aid and Growth in the Pacific Islands," Asian-Pacific Economic Literature, Asia Pacific School of Economics and Government, The Australian National University, vol. 20, pages 38-55, November.
    8. Armstrong, H. & De Kervenoael, R. J. & Li, X. & Read, R., 1998. "A comparison of the economic performance of different micro-states, and between micro-states and larger countries," World Development, Elsevier, vol. 26(4), pages 639-656, April.
    9. Marcela Eslava, 2006. "The Political Economy of Fiscal Policy: Survey," Research Department Publications 4487, Inter-American Development Bank, Research Department.
    10. Briguglio, Lino, 1995. "Small island developing states and their economic vulnerabilities," World Development, Elsevier, vol. 23(9), pages 1615-1632, September.
    11. Khatkhate, Deena R. & Short, Brock K., 1980. "Monetary and central banking problems of mini states," World Development, Elsevier, vol. 8(12), pages 1017-1025, December.
    12. Huff, W G, 1995. "What Is the Singapore Model of Economic Development?," Cambridge Journal of Economics, Oxford University Press, vol. 19(6), pages 735-59, December.
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