THE DIFERENCE BETWEEN STABILISATION POLICIES AND ASAPS

Economic stabilization policies refer to the governmental effort to stabilize the economy. The
government action can be a response to an economic crisis or shock such as sovereign debt
default or stock market crash. It stems from situations from which the economy is suffering from
stress due to inflation, unemployment or even or even steady develop and grow with ought
significant fluctuations ( Lars.E.O.Svensson 2003)

The goal is to keep the economy striving by price stability, total employment and economic
expansion. The tool used for stabilization policy include interests’ rates, cash reserves
requirement and credit control and participation in the open market. The package is usually
initiated either by a government or central bank, or by either or both of these institutions acting
in concert with international institutions such as the IMF or the WB. Depending on the goals to
be achieved, it involves some combination of restrictive fiscal measures to reduce government
borrowing and monetary tightening to support the currency. The two main tools in use today to
increase or decrease demand are to lower or raise interest rates for borrowing or to increase or
decrease government spending. These are known as monetary policy and fiscal policy,
respectively. As the name implies, stabilization policy helps to stabilize the economy through
effective control of aggregate demand and supply in an economy, health price levels and
adequate monitoring of trading in the economy.

The stabilization polices focuses on the stabilization policies focus on cutting the inflation rate and
the trade deficit by restricting aggregate demand through cutting governmental expenditures, and
through monetary restrictions (Taylor, 1994, p. 40-41). While the structural adjustment programs
consist of loans - SALs provided by the IMF and the WB to countries that experience economic
crises. Their stated purpose is to adjust the country's economic structure, improve international
competitiveness, and restore its balance of payments. The IMF and World Bank require borrowing
countries to implement certain policies in order to obtain new loans or to lower interest rates on
existing ones. These policies are typically centered around increased privatization, liberalizing trade
and foreign investment, and balancing government deficit. The conditionality clauses attached to the
loans have been criticized because of their effects on the social sector.

Both the stabilization policies and the structural adjustment programs have similar agenda which is
to stabilize the county’s economy.
REFERENCES

Brookings Institution. "Recession Ready: Fiscal Policies to Stabilize the American Economy ."
Accessed Jan. 6, 2021
National bureau of economic research.” Monetary policy and real stabilization”. February 2003.
.