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Importance of Economic Analysis in Policy Formation

In order to solve various economic problems, economic policies are formulated. Behind these policies, there is an analytical framework of economic theory. Economic policy is equally important for both developed and developing countries. In developed countries, economic policy is important for maintaining and stabilizing already achieved growth, and for the proper distribution of wealth. Whereas, in developing countries, economic policy plays significant role in alleviating poverty, reducing unemployment and attaining higher growth.

Economic analysis includes both micro and macro economic analysis in which economic events are studied on the basis of observed facts. Economic analysis provides the entire knowledge of the existing state of economic events. After having the full knowledge of existing situation of the subject under consideration, economic policy formulation becomes possible. Economic policy intends to attain specified goal in the future.


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