Transcript Macro-economic Framework and Employment Creation

ITCILO/ACTRAV COURSE A1-56354
Capacity Building for Members of Youth
Committees on the Youth Employment Crisis in Africa
26 to 30 August 2013
Macro Economic Framework and
Employment Creation
Issues
Fiscal Policy
Monetary Policy
Investment Policy
Industrial Policy
Trade Policy
What is Fiscal Policy?
The use of government revenue collection
(taxation) and expenditure (spending) to influence
the economy.
Government taxation and government spending
can affect the following variables in the economy:
Aggregate demand and level of economic
activity;
The pattern of resource allocation;
The distribution of income.
Stances of Fiscal Policy
The three main stances of fiscal policy are:
Neutral Fiscal Policy
Expansionary Fiscal Policy
Contractionary Fiscal Policy
Methods of Funding
 Taxation
 Seigniorage, the benefit from printing money
 Borrowing money from the population or from
abroad
 Consumption of fiscal reserves
 Sale of fixed assets (e.g. land)
Economic Effects of Fiscal Policy
Governments use fiscal policy to influence aggregate
demand in the economy aimed at achieving:
 Price stability
 Full employment
 Economic growth
Increasing government spending and decreasing tax
rates is an essential tool for:
 Building the framework for strong economic growth
 Working towards full employment
What is Monetary Policy?
Monetary Policy is when a nation’s Central Bank increases
the money supply or decreases it.
When interest rates are high:
 The money supply contracts
 The economy cools down
 Inflation is prevented.
When interest rates are low:
 The money supply expands
 The economy heats up
 Recession is avoided.
Investment Policy
Definition:
An Investment Policy is any government regulation or law
that encourages or discourages foreign investment in the
local economy.
Global rules that govern economic integration discourage
protectionist measures:
Directed at foreign investors that explicitly or “de facto”
discriminate against them;
Directed at domestic companies that require them to
repatriate assets or operations to the home country.
Continues…
A good investment policies is one that strives to:
Create synergies with wider economic development
goals or industrial policies, and achieve smooth
integration in development strategies.
Foster responsible investor behaviour and incorporate
principles of CSR.
Ensure policy effectiveness in their design and
implementation and in the institutional environment
within which they operate.
Continues…
Key Investment Policy Challenges:
Integrating investment policy in development
strategy
Incorporating sustainable development objectives in
investment policy
Ensuring investment policy relevance and
effectiveness
Balancing rights and obligations of States and
Investors
Core Principles for Investment Policymaking
Investment for sustainable development
…overarching objective of investment policymaking
Policy coherence
…grounded in a country’s overall development strategy
…coherent and synergetic
Public governance and institutions
…involving all stakeholders …standards of public governance
…predictable, efficient and transparent procedures for investors
Dynamic policymaking
…regular reviews for effectiveness and relevance
Balanced rights and obligations
…setting out rights and obligations of States and investors in the
interest of development
Right to regulate
…in the interest of the public good and to minimize potential
negative effects
Openness to investment
…in line with development strategy …open, stable and
predictable entry conditions …
Investment protection and treatment
…adequate protection to established investors …nondiscriminatory
Investment promotion and facilitation
…aligned with sustainable development goals …minimize risk of
harmful competition for investment
Corporate governance and responsibility
…promote adoption of and compliance with best international
practices of CSR
International cooperation
…address shared investment-for-development challenges …avoid
investment protectionism
Investment Policy Guidelines
Adoption of a broad road map for economic growth
and sustainable development
Promulgation of rules and regulation on investment
and in a range of other policy areas to ensure
coherence.
Appropriate implementation and institutional
mechanisms
Policy Coherence Initiative
The goal policy coherence initiative is to ensure:
 Coherence and interaction across policy areas
 Better coordination among stakeholders
The key elements of this approach are:
 Better balance between objectives such as growth, equity,
employment and Decent Work
 More comprehensive policy mix and better sequencing to
obtain these objectives
 Creation of more policy space to implement national policy
priorities
Industrial Policy
Industrial Policy – government-sponsored program in which
the public and private economic sectors coordinate their
efforts to develop new technologies and industries.
Government provides financial support and capital to the
private sector through:
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Direct subsidies
Tax credits
Government run development banks
Certain policies such as the ISI in favour of domestic industries
Industrial Policies are sector specific.
The End
Thank You!
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