Working Paper No. 73 - Issues in Macroeconomic and Financial Policies, Stability and Growth

By historic standards, world economic growth has been relatively low in the past two decades. Its instability is due to the financial liberalization in developing countries, creating low demand and causing problems in unemployment, government debt and deficits, and trade imbalances. The challenge is bringing more rapid stable growth and spreading globalization benefits more equally worldwide. Policymakers should focus on rapid capital accumulation and job creation through new approaches in macroeconomic and financial policies and global mechanisms. Objectives include multilateral discipline, international policy coordination, overcoming unemployment, poverty, and creating good economic relations. The paper suggests reforming the IMF approach on its lending strategies to low and middle income countries, crisis intervention, and debt workout mechanisms and transforming into a more multilateral institution. It also recommends reforming the G3 exchange rate structure, better governance in international capital flows, regulating capital accounts, ensuring exchange rate stability, and having more consistent policies for better growth.