Question

What is the relationship between poverty and the macro economy? How has this relationship changed over time?

Answer 1

The macroeconomic impacts can be direct as well as indirect. The direct impact works through prices and public spending on the poor (supply of public goods directly targeting the poor; jobs given for the poor such as education), while the indirect impact of macroeconomic policy on poverty works through its effect on development. Although there are many studies on poverty measurement and definition, policy measures on how best to reduce poverty are still limited.

Macroeconomic strategies are aimed at managing structural shocks and weathering transient shocks.
There is a need to define macroeconomic policies that have distributional and allocation properties when it comes to economic growth as a long-term goal. Macroeconomic policies refer to contractions in public spending and restrictive monetary policy, usually designed with growth to create conditions for stability, but these policies may have negative effects on poor households.Macroeconomic policies refer to contractions in public spending and restrictive monetary policy, usually designed with growth to create conditions for stability, but these policies may have negative effects on poor households. Short-term macroeconomic policies are inextricably linked with long-term growth strategies. Therefore, macroeconomic policies need to stimulate growth and generate jobs in order to identify a trend of growth that promotes poverty reduction

On the fiscal side, macroeconomic reform can be growth-oriented by decomposing public spending, and on the monetary side, the secret to growth-oriented adjustment is to channel non-bank credits to the lower end of the private sector. Fiscal policy is one of the main forms of distribution that can work for the benefit of the disadvantaged. Because contractionary fiscal policies can adversely affect the poor, it is important to consider the objective of poverty reduction in terms of a target level of development expenditure.