INTEGRATING MACROECONOMIC POLICIES AND SOCIAL OBJECTIVES: CHOOSING THE RIGHT POLICY MIX FOR POVERTY REDUCTION

Abstract: Macroeconomic frameworks and social objectives need to be explicitly integrated at the conceptual stage. Macroeconomic policies aim at macroeconomic stability not as an end to itself, but as a necessary precondition for sustained growth, which is critical to poverty reduction. The range of available macroeconomic and social policy options may be constrained by a country’s situation, but the policies and reforms necessary for macroeconomic stability may themselves affect social and poverty outcomes, although there is always scope for increasing the pro-poor bias of macroeconomic policy through the choice of the appropriate policy instruments or the timing of reforms. However, integrating social and poverty reduction goals with macroeconomic goals is not simply about adding social policies to a pre-designed sound macroeconomic framework. It requires an full awareness of the tradeoffs and of both the short-and long-term impacts of macroeconomic policies on social outcomes and vice versa that can only be gained through an interdisciplinary approach that uses social, economic, institutional, and political analysis to identify the links and transmission mechanisms between macroeconomic policies, poverty, and livelihoods. This approach can contribute to enhanced public transparency and ownership, and identify the best policy combination for equitable growth, poverty reduction, and social justice