Development Account Projects
Strengthening Coherence and Coordination of Development Policies
National governments often find themselves struggling to make choices and resolve conflicts between different policy objectives and economic trade-offs, such as price stability and full employment, equity and efficiency, fiscal discipline and scaling-up of social spending, and external and internal equilibrium. These decisions are complicated by the international financial architecture, where rules administered by international agencies (such as those on intellectual property rights, international trade, financial openness, and conditionalities associated with aid) can come into conflict with national goals and sensitivities.
At the same time, macroeconomic stabilization has become more challenging due to increased global integration. For example, international capital inflows have become extremely volatile, increasing during periods of global economic expansions and falling during economic slowdowns. While such capital flows have been shown to limit the ability of countries to pursue independent monetary and exchange rate policies, the use of capital controls to manage capital inflows has been limited by international and bilateral trade agreements, fear of backlash from the markets, and lack of expertise. Technical assistance in this area would be extremely useful, as would regional cooperation, to limit the stigma attached to any one country imposing controls.
The main beneficiaries of this project will be national policy-makers in finance ministries and central banks, and other stakeholders in developing countries. They will acquire broader understanding and capacities to evaluate the benefits, drawbacks, synergies and trade-offs of alternative policy choices to enhance macroeconomic, social, and environmental policymaking, as well as learn from other countries' experiences and from concrete policy proposals.
UN DESA will partner with the Initiative for Policy Dialogue (IPD) at Columbia University and IPEA in Brazil, who will provide additional funding and other resources, as well as expertise and better access to a wide network of developing country policymakers. IPD was considered to be the most suitable partner owing to its global reputation and past record of influencing the policy process in developing countries; extended network of experts in developing countries; expertise in working with national governments; and experience in adopting a comparable framework in multiple countries worldwide.
The project's objective is to enhance the capacities of policy- makers in the Ministries of Finance and Central Banks and of other key stakeholders in developing countries to evaluate national policies within the context of current economic thinking on macroeconomic, trade, foreign aid, financial market and climate change issues.
- Improved capacity of national policy-makers to analyze alternative macroeconomic policy options in the context of the current environment, based on a greater knowledge of policy options and their implications.
- Enhanced capacity of national policy-makers to design development policies on macroeconomic, trade, foreign aid, financial market and/or climate change issues to improve human, social and/or environmental outcomes.
The activities under the project have helped national policy-makers develop capacity to design policies related to capital account management and financial market regulations.
As envisaged in the project document, an inter-regional workshop took place on 23-24 August, 2011, in Rio de Janeiro, Brazil, which focused on financial markets reform, with special attention to prudential management of the capital account and developing country domestic regulatory regime strategies. The meeting brought together policymakers from developing countries, representatives from international organizations, and academics who exchanged their views, experiences, and research on how to better manage volatile, pro-cyclical capital flows, while promoting stability and improving the resilience of their financial systems. Participants gained new knowledge through familiarization with the latest academic thinking on the issues, as well as from other country experiences. Positive verbal and written feedback on how the seminar influenced their thinking was received from numerous participants. A press conference and public panel were also held after the workshop to further discussions and disseminate outcomes.
As a follow-up to the workshop, a summary has been drafted and circulated to participants, and an outcome document is currently being prepared by a consultant. A number of questions – such as the circumstances and ways to intervene in the capital account – were raised at the workshop, which require further consideration. In view of the importance of these issues, participants have expressed keen interest in setting up and participating in ensuing online dialogues, with the aim of producing discussion outcome documents (‘policy toolkits’).