Macroeconomic Policy For Employment Creation: The Case Of Malawi

Author: Sonali Deraniyagala and Ben Kaluwa

Year: 2011

Category: Books

Abstract

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.

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