Active Macroeconomic Policy for Accelerating Achievement for the MDG TargetsPublished on 30 Sep 2010
This paper argues that, although the global financial crisis is undermining the achievement of the MDGs, active macroeconomic policies can mitigate the negative impacts. The paper shows that MDG-focused countercyclical macroeconomic policies: fiscal, monetary and exchange rate are feasible in developing countries. Such policies include 1) elimination of the countercyclical conditionalities and “benchmarks” for eficit limits, inflation rates and foreign exchange holdings; and 2) reliability on delivery of external assistance. The combination of a carefully calibrated stimulus package and donor flexibility offers the firm prospect of overcoming the potentially serious effects of external shocks. While any stimulus package involves risks, these are minor compared to the certain effect of the global recession on poverty and public welfare.