How best to link poverty reduction and debt sustainability in IMF–World Bank models?

Abstract

This paper attempts to provide an economic model in the context of developing countries to address the policy strategies related to poverty reduction. With a view to deal with the shortcomings of the existing approaches as regards poverty reduction, this paper develops a model on the basis of the policy framework of the IMF and the World Bank to show how demand growth can be a crucial mechanism in determining the potential rate of growth, and then to suggest ways in which poverty-conceptualised officially in absolute terms with a subjective cut-off point (e.g. US $1/$2 a day), and a new objective measure in terms of consumption deprivation-can be linked with the key policy variables contained in the adjustment programmes. A strategy of investment in infrastructure and

How Does Fiscal Consolidation Impact on Income Inequality?

“…This suggests that the burden of the consolidation program is shared unevenly when the size of the plan is relatively small, affecting more negatively the households at the bottom of the income distribution. In the same line of reasoning and similar in spirit with this finding, Mallick and Granville () argue that debt relief (which could be achieved, for instance, via fiscal consolidation) would only provide a temporary (although not sustainable) solution to poverty reduction.…”

How Does Fiscal Consolidation Impact on Income Inequality?

“…This suggests that the burden of the consolidation program is shared unevenly when the size of the plan in relatively small, affecting more negatively the households at the bottom of the income distribution. In the same line of reasoning and similar in spirit with this finding, Mallick and Granville (2005) argue that debt relief (which could be achieved, for instance, via fiscal consolidation) would only provide a temporary (although not sustainable) solution to poverty reduction.…”

How Do Fiscal Consolidation and Fiscal Stimuli Impact on the Synchronization of Business Cycles?

“…() show that government spending cuts can bring public debt back to a sustainable path, but fiscal discipline also plays a key role as it helps shorten the duration of fiscal consolidations. Mallick and Granville () also find that poverty reduction can only be temporarily achieved via fiscal adjustments.…”