Macroeconomic Stability and Inclusive Growth

Hamid Davoodi, Peter Montiel and Anna Ter-Martirosyan

No 2021/081, IMF Working Papers from International Monetary Fund

Abstract: We survey the literature on the relationship between macroeconomic stability and inclusive growth and identify gaps in our knowledge. We examine the role of macroeconomic policies (fiscal, monetary, macroprudential, and exchange rate) and measures of inclusiveness (income inequality, consumption inequality, wealth inequality, poverty, and unemployment) across countries at different income levels. Avoiding procyclical macroeconomic policies and mitigating macroeconomic volatility should be on the agenda of all policymakers concerned with promoting inclusive growth. The emerging theory and evidence suggest a strong role for macroeconomic policies in shaping inclusive growth, both in the short-run and the long-run. The two-way relationship between the macroeconomy and inequality underscores the challenge of identifying and estimating causal relationships. Models with heterogeneous agents have much to offer in this area.

Keywords: macroeconomic policy; inclusive growth; inequality; poverty; unemployment; heterogeneous agents; consumption inequality; wealth inequality; macroeconomic volatility; income loss; inequality result; Income inequality; Income distribution; Income; Fiscal consolidation; Global; Caribbean (search for similar items in EconPapers)
Pages: 36
Date: 2021-03-19
New Economics Papers: this item is included in nep-fdg, nep-gro and nep-mac
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