In setting up a macroeconomic policy, the central government has six macroeconomic objectives in mind. In other words, they consider it as the overall purpose and direction of the macroeconomic policy. These are clearly stated in the Constitution of Philippines. But what is more debated is how to accomplish the six macroeconomic objectives in the long run. How can the country effectively tackle the problems of globalization?
When determining the direction and the goals of its macroeconomic policy, the government first has to establish a vision or the ultimate goal. This will serve as the foundation for the formulation and implementation of the program. To know the ultimate goal, the government should have a balanced view of the economy and of course its structure as a whole. The growth of the economy should be balanced on the total income of the people, the capital stock, employment and output. Other concerns include taxes, trade, environment, social welfare and foreign aid.
The balanced scorecard implementation involves a series of measures that will be used to measure the strengths and the weaknesses of the system. One of these is the assessment of the current operations of the economy. It includes a study of the inter-connectedness of all economic units. These include: the production, distribution, consumption and payments of goods and services, which are then linked with macroeconomic objectives. This enables the government to align economic policies with the balanced scorecards.
Another way of putting it is that the government has six macroeconomic objectives. These are to achieve balanced growth, efficient allocation of resources, efficient utilization of capital, transparency in public spending and promote economic flexibility. It aims to promote growth by increasing productivity and raising living standards. The objective also aims to eliminate unemployment by promoting jobs creation. And finally, to ensure fair taxation by ensuring fair use of tax revenues.
When dealing with macro-economic objectives, it is imperative for the government to have a clear view on the direction of the economy. The central bank, which is an independent institution of the government, carries out stress-testing of the various economic policies. To get a clear picture of where the macro-economic objectives lie, it is important to conduct various stress-testing conducted by various independent agencies.
Policy makers, who are accountable for the macro objectives, formulate and control a series of policy strategies to achieve macro objectives. One of these is the use of the interest-rate management, which involves setting the official rate of interest and keeping it at levels that are sustainable. The central bank can also utilize other tools such as the base interest rate. Changes in . . . . . . inflation may be applied using the interest rate determination exercise. Other tools that the government uses include: the change in the base interest rate, changes in the balance of payments, changes in the trade surplus and government purchases and sales of tradable securities.