INTERNATIONAL MACROECONOMIC POLICY

International Macroeconomic Policy

International Macroeconomic Policy

Case One

Contribution of Macroeconomic theory to Policy Making

Some types of useful analysis and evaluation have become particularly unpopular in modern economics. Perhaps considering history seriously and using it to develop coherent contexts for economic theories and empirical evaluations is rarest of all. At the same time, the matter of monetary history has fascinated monetary economists for decades. It must be so because in economics, a social science consists of the experiments which are few and far between with the exception of the experimental branch of economics. History, however, provides researchers with informative accounts and observations that might sometimes, one may think, illustrate and explain important economic relationships and relevant non-economic factors. The object of money is convenient in this regard: it has a long history and has enjoyed a tremendous social, political, economic, and cultural importance throughout the ages. Money creation and money management has stubbornly remained in the focus of the powerful and has steadily risen in importance as a necessary feature of an organized civilization (Arner, Douglas, Buckley & Ros, 2010, 239).

As the forces of technological and social progress guided the transition of mankind from a purely subsistence economy to that built around the market, money's role in people's lives was becoming more central. Trade, increases in wealth, incomes, and expenditures invariably lead to substantial developments of money. Moreover, the social role of money is that of creating common contexts for interaction and exchange. Local money leads to and is influential in local contexts, while global money brings economic actors to a common denominator on a far larger, global scale. Contemporary level of development and the degree of integration of both developed and developing nations in the world economy is unprecedented. This means that money as such and in particular, money that may have an international reach is much more significant in peoples' lives currently than in any other previous time in human history. Globalization that is both ongoing and accelerating necessitates that now more people in the world than ever before demand and depends on the existence and properties of money, whether that be local money since agents' interactions are increasingly more market-based or international because the context of their interactions is becoming increasingly more global (Bowles, Paul, Wang & Baotai, 2008, 353).

Economists of the previous era such as J. M. Keynes, M. Friedman, F. Hayek, J. Robinson, etc. led uncompromisingly serious debates about the role and the use of money as a public policy resource. They understood that correct management of money by policy makers can lead to meaningful improvements in the situations of unemployment, economic growth, inflation, risk and uncertainty. Issues of taxation and money management, naturally, are integral to macroeconomics. Yet, despite their understanding and rapid advances in macroeconomic research and reasoning, the object of money remains largely unconquered as an intellectual phenomenon with a set of intersecting dimensions: political, psychological, economic and cultural. The tasks and problems that careful management of a nation's money ...