Economic integration, macroeconomic policy and micro markets

Policy Paper (Interest) 19

The New Partnership For Africa’s Development (NEPAD) has been established to provide a substantive platform for African countries to initiate a series of policy steps toward more rapid economic growth and poverty reduction. Critics have argued that some of the policies, especially regional integration, will do more harm than good, and have cast the debate as a binary choice between the open and closed economy. Neither a fully closed nor a fully open economy is likely to maximize welfare and growth. In contrast to the notion of policy autonomy in the closed economy, the closed economy requires far more stringent application of price controls, monetary, fiscal, and competition policies than do more open economies to prevent rising inflation and worsening income distribution. On balance, more open trade and capital relationships are preferred, because they help to ensure consistency between macroeconomic policy and microeconomic behaviour and are more conducive to improving income distribution.

Policy Paper (Interest) 19
1 September 2001

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