Space for macroeconomic policy tightens around globe (2)

On the one hand, the banking industry has been unable to restore normal credit function for a long time; on the other hand, fiscal policies were kidnapped by partisan politics.

Therefore the Fed could only take this initiative to gain time for banks and Congress. Unemployment problems, especially the problem of structural unemployment, cannot rely on monetary policies for solution. Opposing voices further hold that quantitative easing is destroying the credibility and political independence the central banks of the developed countries have established in the past 20 years to stabilize inflation, and is bound to lead to very serious consequences.

There is no obvious common trend in the macroeconomic policies of developing countries. Their policy spaces are not quite similar either. China has taken a combination of proactive fiscal policy and prudent monetary policy; Latin America has taken a combination of expansionary monetary policy and sound fiscal policy; while India is faced with limited policy space because of inflation and twin deficits in fiscal and external accounts.

The coordination of macroeconomic policies at international level is even more difficult. The central banks of developed countries act in harmony on quantitative easing but ignore the negative spillover effect of the policy on developing countries. The management and control of such negative impact will represent a major challenge facing the emerging economies this year.

Read the Chinese version: 全球宏观经济政策空间吃紧（国际论坛）;
Source: People's Daily

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