The Applied fiscal-monetary theory: Character of constraint and essentials to the advancement of developing economies.

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The above-projected title as a paper is a coming up academic work for publication in 2021 Journal edition by the author Dr. Emmanuel Tweneboah Senzu, Adjunct Professor of Economics & Investment with the School of Social Sciences & Law, Njala University, Sierra Leone in West Africa and the head of Economic Research, Frederic Bastiat Institute Africa. The paper makes a proposition that the chaotic functioning order in the operating factors of the economy as a system only results in a constraint. And further, argue that persistence in aggregate chaotic functioning becomes a complex constraint creating more distortion in the performance of the economy. Which the study further establishes the major causal factors as a retrain to the mainstream theoretical approach expected to hold a solution to economic growth and development within fiscal-monetary policy and it management space, which fails to address the challenges of developing and underdeveloped economies. With the study recommending a resolution method in a form of a policy framework, having within its job creation system as a core factor to initiate full employment.

This paper is premised on the health of the modern economy for sustainable growth, geared-up towards development, as established on the basis of macroeconomic tenet within the framework of the fiscal-monetary theory. Hence, argue that the theoretical foundation of macroeconomics, in summary, defines the elementary rationalized actions required to be taken by any government of a sovereign nation and its Central Banks at a particular geographical area, and to observe the constraint in other to secure economic growth and possibly sustain it. 

The paper further argues, for any appropriate action to be taken in the public interest of an economy, the effort of the economic manager is to understand and appreciate the character of constraint existing within the geographical area to guide in the construct of appropriate policy frameworks in other to remedy the challenge through the market behaviour. Which was succinctly posit by Samuelson (1947), as he states, the best effort of the economic manager is to maximize the behaviour of agents such as utility by consumers and profits by firms. And establish the stability of equilibrium to the economic systems such as the market. Basically, the fundamental challenge faced by every economic manager is the ability to establish equilibrium to the relationship challenges of price and quantity, cost and production, consumer behaviour and business cycles of the economic market. 

However, what has not been clearly understood and appreciated by mainstream economists of developed countries, in other to draw effective economic calculations and models that resolve market challenges very peculiar to a particular geographical zone, is the identification of unique character of constraints to the factor-relations, which is at play with the fundamentals of the economy, and observed to vary from one geographical point to the other, and never universally constant. As a result, does affect policy framework prescriptions. Therefore, the attempt to mechanically apply an instituted policy, known to be very friendly to advanced economies for its growth and development, sometimes becomes suicidal to developing economies in terms of market expansion and growth. And mostly causes’ retrogression to the growth curve least expected. Therefore, the theoretical foundation of this paper is to establish, a carefully examined character of constraint in developing economies, which defy theoretically expected outcome of universally principled policy applications and its known expected result at any point in time.

The character variation of constraint in different geographical locations, which is undermined in policy application framework for the purpose of simplicity, and assumed by macroeconomic theorists in advanced economies as constant in all situation, to pave easier means towards the acceptance of proposed economic policies as a universal principle, has significantly contributed to economic retrogression and promoted poverty in most developing economies through an exponential escalation of debt burdens, very difficult to be paid instead of expected projected sustainable growth. Hence, the study focuses on the observable constraint in developing and under economies and its characteristics for conceptualization, empirical testing and modelling for policy development frameworks as a recommendation towards fiscal-monetary management space of fragile economies and its sustainable growth.

The paper submission, therefore, structure it propositions under the following fiscal-monetary thematic areas as below;

[1] Standard macroeconomics constraint and endogenous money creation approach applicable to developed economies but ineffective in developing economies to sustain growth.

[2] The examination of characters of fiscal constraint in developing and underdeveloped economies, which defy the principled expectation of macroeconomic development theory.

[3] The proposition of fiscal-monetary policy framework as a recommendation to resolve the current developmental challenges associated with developing and underdeveloped countries.

The interest to understand the word construct of this paper, certain key words adopted by the study will be carefully defined as follows;

Constraint: – Is any action or behaviour of the economy that creates a limitation or restriction towards a purposive economic action for a progressive result.

Money Supply: – Is the total value of money available in an economy at any point in time

Published by the Secretariat of Frederic Bastiat Institute Africa

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Post source : Library of Frederic Bastiat Institute

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