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Stability with GrowthMacroeconomics, Liberalization and Development$
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Joseph Stiglitz, José Antonio Ocampo, Shari Spiegel, Ricardo Ffrench-Davis, and Deepak Nayyar

Print publication date: 2006

Print ISBN-13: 9780199288144

Published to Oxford Scholarship Online: September 2006

DOI: 10.1093/0199288143.001.0001

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Is Macroeconomics Different in Developing Countries?

Is Macroeconomics Different in Developing Countries?

Chapter:
(p.52) 4 Is Macroeconomics Different in Developing Countries?
Source:
Stability with Growth
Author(s):

Joseph E. Stiglitz (Contributor Webpage)

José Antonio Ocampo (Contributor Webpage)

Shari Spiegel

Ricardo Ffrench-Davis (Contributor Webpage)

Deepak Nayyar

Publisher:
Oxford University Press
DOI:10.1093/0199288143.003.0004

Though macroeconomics was developed for developed countries, developing countries often use this corpus of knowledge — with its competing schools of thought — without any significant modification. It is by no means clear that applying these theories to developing countries is either justified or appropriate. This chapter examines the differences in macroeconomic policy between developing and developed countries. The basic macroeconomic aggregates: output, employment, and inflation are, of course, the same for both developed and developing economies. So too are the basic identities and equilibrium conditions: savings must still equal investment, output must equal income, and aggregate demand is the sum of consumption, investment, government expenditures, and net exports. However, systematic differences between the economies of developed and developing countries and between developing countries themselves, such as the relative effectiveness of macroeconomic tools, give rise to large variation in economic outcomes and policy choices.

Keywords:   developed economies, developing economies, growth constraints, savings rate, foreign exchange reserves, structural characteristics, fiscal policy, monetary policy

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