The macroeconomics of poverty reduction and income distribution: the case of Bosnia and Herzegovina
The macroeconomics of poverty reduction and income distribution: the case of Bosnia and Herzegovina

Summary/Abstract: In the last decade there has been considerable discussion on what macroeconomic policies shall be pursued by developing countries as well as countries in transition as mean of successful transformation and effective mechanism to spur growth, promote stability, and most importantly minimize the social cost of transition. In this context there has been a growing debate about the costs and merits of austerity macroeconomic polices often pursued in these countries. This paper theoretically examines the broader consequences of restrictive macroeconomic and fiscal framework on poverty and inequality, while exploring on macro-micro transmission mechanisms, and empirical illustration of Bosnia and Herzegovina (BiH). Since the macroeconomic policy for the whole of BiH is largely dictated by the operating rigid Currency Board Regime, the paper specifically assesses the impact of the regime on poverty and income distribution through the rigidities it imposes on the public finance. The paper investigates the link between the monetary and fiscal policies and rising inequality and poverty in the country. The paper considers, in particular, the analysis of a) efficiency and equity; b) stability and growth c) growth, unemployment and inflation for the impact on income distribution and poverty.

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