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A Broad View of Macroeconomic Stability

  • José Antonio Ocampo
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    This paper recommends a broad concept of macroeconomic stability, whereby “sound macroeconomic frameworks” include not only price stability and sound fiscal policies, but also a well-functioning real economy, sustainable debt ratios and healthy public and private sector balance sheets. These multiple dimensions imply using multiple policy instruments. The paper elaborates a framework for developing countries that involves active use of counter-cyclical macroeconomic policies (exchange rate, monetary and fiscal), together with capital management techniques (capital account regulations and prudential rules incorporating macroeconomic dimensions). It also explores the role of international financial institutions in facilitating developing countries’ use of counter-cyclical macroeconomic policies.

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    Paper provided by United Nations, Department of Economics and Social Affairs in its series Working Papers with number 1.

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    Length: 25 pages
    Date of creation: Oct 2005
    Date of revision:
    Handle: RePEc:une:wpaper:1
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    1. Svensson, Lars E.O., 1998. "Open-Economy Inflation Targeting," Seminar Papers 638, Stockholm University, Institute for International Economic Studies.
    2. Carmen M. Reinhart & Kenneth S. Rogoff, 2002. "The Modern History of Exchange Rate Arrangements: A Reinterpretation," NBER Working Papers 8963, National Bureau of Economic Research, Inc.
    3. Leonardo Leiderman & Carmen Reinhart & Guillermo Calvo, 1992. "Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors," IMF Working Papers 92/62, International Monetary Fund.
    4. Hausmann, Ricardo & Panizza, Ugo, 2003. "On the determinants of Original Sin: an empirical investigation," Journal of International Money and Finance, Elsevier, vol. 22(7), pages 957-990, December.
    5. Gabriel Palma, 2000. "The Three Routes to Financial Crises: The Need for Capital Controls," SCEPA working paper series. SCEPA's main areas of research are macroeconomic policy, inequality and poverty, and globalization. 2000-17, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
    6. Graciela L. Kaminsky & Carmen M. Reinhart & Carlos A. Vegh, 2004. "When it Rains, it Pours: Procyclical Capital Flows and Macroeconomic Policies," NBER Working Papers 10780, National Bureau of Economic Research, Inc.
    7. Taylor, Lance, 1998. "Capital Market Crises: Liberalisation, Fixed Exchange Rates and Market-Driven Destabilisation," Cambridge Journal of Economics, Oxford University Press, vol. 22(6), pages 663-76, November.
    8. Laurent Clerc & Françoise Drumetz & Olivier Jaudoin, 2001. "To what extent are prudential and accounting arrangements pro- or countercyclical with respect to overall financial conditions?," BIS Papers chapters, in: Bank for International Settlements (ed.), Marrying the macro- and micro-prudential dimensions of financial stability, volume 1, pages 197-210 Bank for International Settlements.
    9. Ffrench-Davis, Ricardo & Larrain, Guillermo, 2002. "How Optimal are the Extremes? Latin American Exchange Rate Policies During the Asian Crisis," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
    10. Ethan Kaplan & Dani Rodrik, 2001. "Did the Malaysian Capital Controls Work?," NBER Working Papers 8142, National Bureau of Economic Research, Inc.
    11. van Wijnbergen, Sweder J G, 1984. "The 'Dutch Disease': A Disease after All?," Economic Journal, Royal Economic Society, vol. 94(373), pages 41-55, March.
    12. Barry Eichengreen & Ricardo Hausmann & Ugo Panizza, 2003. "Currency Mismatches, Debt Intolerance and Original Sin: Why They Are Not the Same and Why it Matters," NBER Working Papers 10036, National Bureau of Economic Research, Inc.
    13. Stiglitz, Joseph E., 2003. "Whither reform? Towards a new agenda for Latin America," Revista CEPAL, United Nations Economic Commission for Latin America and the Caribbean (ECLAC), August.
    14. Akira Ariyoshi & Andrei Kirilenko & Inci Ötker & Bernard Laurens & Jorge Iván Canales Kriljenko & Karl Friedrich Habermeier, 2000. "Capital Controls: Country Experiences with Their Use and Liberalization," IMF Occasional Papers 190, International Monetary Fund.
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