Posted on June 28, 2012 by iMFdirect
By David Coady and Sanjeev Gupta
The issue of rising income inequality is now at the forefront of public debate. There is growing concern as to the economic and social consequences of the steady, and often sharp, increase in the share of income captured by higher income groups.
While much of the discussion focuses on the factors driving the rise in inequality—including globalization, labor market reforms, and technological changes that favor higher-skilled workers—a more pressing issue is what can be done about it.
In our recent study we find that public spending and taxation policies have had, and are likely to continue to have, a crucial impact on income inequality in both advanced and developing economies.
In advanced economies, this is especially important given that the ongoing fiscal adjustment needs to be continued for many years to reduce public debt to sustainable levels. But it is equally important in developing economies where inequality is relatively high.
Filed under: Advanced Economies, Civil Society, Economic research, Emerging Markets, Employment, Globalization, growth, Inequality, Politics, Public debt | Tagged: 99%, automatic stabilizers, David Coady, education, fiscal policy, Globalization, health, higher-skilled workers, iMFdirect blog, inequality, Ireland, labor market reforms, loopholes, OECD, poverty, property, redistribution, Sanjeev Gupta, Spain, tax, technological change, top 1%, unemployment benefits, United States, wealth | 10 Comments »
Posted on September 9, 2009 by iMFdirect
By Antoinette Sayeh
Ensuring that sub-Saharan Africa emerges strongly from global recession will require both a sustained recovery in the global economy and sound domestic policies. The good news is that domestic policies are already supporting economic activity.
Many countries entered the crisis in much better shape than in the past. The region’s fiscal position was on average in balance in 2008, compared with big deficits in past cycles. Debt levels were also much lower than in the early 1990s, supported of course by recent debt relief initiatives. Inflation had been brought under control across most of the region. And, reflecting sounder and more open policies, countries had accumulated much larger buffers of foreign reserves—the median ratio of reserves to GDP was 14 percent last year, compared to about 5 percent in the early 1970s.
Nigerian market: many African economies are in better shape than during previous crises (photo: Reuters)
This favorable starting point gave many countries in the region a fair amount of breathing space. They were able to respond to the crisis by allowing fiscal deficits to rise and interest rates to fall, reaping the rewards of previous good policies. Countries with flexible exchange rates also let them adjust to the changing external environment. Such policy responses helped economies absorb some of the impact of the external shocks. Not all countries were able to take this route, however. Faced with large macroeconomic imbalances that pre-dated the global slowdown, a few countries had to tighten their fiscal or monetary policy stance.
Filed under: Africa, Economic Crisis, Financial Crisis, growth, LICs, Low-income countries, recession | Tagged: aid, automatic stabilizers, Botswana, concessional lending, fiscal policy, foreign reserves, infrastructure, Mauritius, MDGs, Tanzania | 3 Comments »