Promoting an Effective Market Economy in a Changing World

Posted: 13 Sep 1999

See all articles by Willem H. Buiter

Willem H. Buiter

Citigroup New York; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute); Columbia University

Ricardo Lago

European Bank for Reconstruction and Development (EBRD) - Office of the Chief Economist

Nicholas Stern

Stern Review on the Economics of Climate Change

Date Written: October 1996

Abstract

In this paper we examine the main challenges in promoting an effective market economy. While the paper ranges widely across the spectrum of economic institutions and policies, the central theme is the importance of macroeconomic stability for economic growth in the medium and long run. Macroeconomic stability may be seen as a public good. Its provision is among the essential responsibilities of the state both in modern market economies and in economies transforming themselves into modern market economies. Following a brief introduction, Section II considers four key aspects of the economic environment of the coming decades: increasing internationalization; market- orientation; diminished government role; and high real interest rates. Section III reviews the reasons why macroeconomic stability matters for economic performance and summarizes the key empirical evidence supporting the existence of a causal link. Section IV deals with the design of domestic and international policies and institutions to promote macroeconomic stability and Section V asks how national government and international institutions can take advantage of the current relatively stable global macroeconomic environment to improve medium-term economic performance and promote long-term growth. Section VI concludes. While our discussion will range broadly, both theoretically and empirically, we shall emphasize lessons for, and experience from, countries attempting to create a market economy.

JEL Classification: E61, E63, F31, F33, H11, H20, H40

Suggested Citation

Buiter, Willem H. and Lago, Ricardo and Stern, Nicholas, Promoting an Effective Market Economy in a Changing World (October 1996). Available at SSRN: https://ssrn.com/abstract=5196

Willem H. Buiter (Contact Author)

Citigroup New York

Citigroup Global Markets Inc
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New York, NY 10013
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HOME PAGE: http://willembuiter.com/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Columbia University ( email )

420 West 118th Street
New York, NY
United States

Ricardo Lago

European Bank for Reconstruction and Development (EBRD) - Office of the Chief Economist ( email )

One Exchange Square
London EC2A 2JN
United Kingdom
171-338 6634 (Phone)
171-242 0392 (Fax)

Nicholas Stern

Stern Review on the Economics of Climate Change

HM Treasury
1 Horse Guards Road
London SW1A 2HQ
United Kingdom

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