Economic policy analysis studies government actions aimed at affecting the economy, including their origin, public acceptance, and impact on citizens and the economy. Policies may be suggested by external sources, and their effects may not be immediately popular or visible.
To understand the concept of economic policy analysis, it is necessary to understand the meaning of economic policy. The term, economic policy, refers to those actions or decisions issued by the government of a particular country which aim to cause some form of effect in the economy. One of the most important tools used by governments to bring about these desired economic changes is the application of fiscal policies aimed at producing a government-intended effect in the macro and, by extension, micro-economics. As such, economic policy analysis refers to the study of these various types of policies, including their origin, precipitating factors, public acceptance of the policies, and the effect of these policies on the economy.
Considerations about the origin of economic policy during an economic policy analysis are based on the fact that the origin of economic policy may not necessarily be domestic. Most of the time, governments make an assessment of the economy itself in order to devise the particular type of economic policy to apply. In other cases, the source of the economic policy may be an external source that may have been suggested by outside parties, or is part of a package that has been given to that particular economy as a means to effect some change in the economy. For example, an economic policy analysis of some economic programs in developing countries may come from external sources in the form of financiers or donors who use monetary factors as incentives to lure the government into implementing those economic policies . An example of this can be seen in conditions that are associated with grants or money that can be given to such countries by multilateral development banks such as the African Development Bank or the World Bank.
Another consideration in analyzing economic policies is the effect of those economic policies on the country’s citizens. For example, economic policies may be unpopular that will not be well received by citizens due to the short- and medium-term difficulties they will encounter before they can expect to see long-term improvements. An inclusion in the analysis of economic policies is also the effect that policies have on the economy. For example, government decisions to introduce different types of tax policies are usually made with the expectation that they will bring about a change in the current economic situation for that country.
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