This paper investigates the links between macroeconomic policy and employment
creation in Malawi. It identifies ways in which monetary, fiscal and external sector
policies (dealing with the exchange rate and the capital account) can be used to boost
employment creation in Malawi.
The prevailing orthodoxy on macroeconomic policy focuses on stabilisation and on
maintaining internal and external balance. This is seen as the optimal way to create
conditions conducive to rapid economic growth, which in turn boosts employment. This
paper departs from the orthodoxy and argues that a developing country such as Malawi
can use macroeconomic policies that go beyond narrow stabilisation. We identify a range
of macroeconomic policy instruments that can help direct the Malawian economy onto a
path of employment-creating economic growth.
Section One presents the thematic background for our study. Section Two deals
with the key features of growth, poverty and employment in the Malawian economy.
Section Three outlines the macroeconomic policy environment in the country.
Section Four examines monetary policy options for enhancing employment-rich growth.
Section Five examines fiscal policy options for job creation. Section Six deals with
exchange rate, capital account and other external sector policy options for boosting
economic growth and employment. Section Seven summarises the main conclusions of
the report.