Macroeconomic policy lies at the core of long term development success. Governments need the ability to effectively analyse and choose between alternative policy options - not only in setting an economic strategy but in ensuring it remains on track.
Building a macroeconomic model should not be a one-off process. But for some countries, investing in complex macroeconomic models proves to be just that: they simply do not have the skills or institutional capacity to ensure that the carefully constructed model can remain at the heart of policy-making. Ensuring that models are used by their recipients requires a deeper understanding of the developing country context.
Current thinking in development assistance stresses the importance of economic growth in tackling poverty. But as countries go all-out for growth, there is a danger that economic policy can overlook the needs of the poor, focusing solely on higher GDP rather than seeking to achieve income growth at the household level. So how can pro-poor growth be achieved through economic policy?
Effective policy making relies on evidence. Before committing millions of taxpayers money or development assistance to a national strategy, a specific policy or an individual project, it is only right that governments forensically examine the economic and social outcomes. The challenge is how to quantify what outcomes to expect in countries where data is limited and the policies or projects may not have been pursued before.