International political economy, IPE refers to social science that seeks to understand how political institutions and actors influence economic interactions in the global trading, borrowing, investment and lending. The study of international political economy is important because a country’s economic and political choices are affected by the money flows and trade in the global markets. The actors in an economy depend on the politicians to ratify their policies. The political environment is a big enabler for both a country’s and a world economic welfare. The understanding of economics enables political leaders to advance their political agendas by pushing economic policies favorable in promoting a country’s economic growth. Some of the policies used to protect a countries economy include quotas and tariffs (Suranovic, 2018). Although every state is interested in its economy by paying its own political game, countries may cooperate to create agreements such as free trade areas to realize mutual benefits.
The government exercises its power through the imposition of taxes to discourage plenty of a commodity and subsidies on other products to increase its supply. A country that has a political problem discourages other countries to trade with them, which may lead to economic depreciation. Politics of a country play a huge role in an economy by ensuring the creation of optimal trade policies to make sure losses encountered in some markets are recovered by benefits in others. Politics play a significant role in economics in improving the terms of trade while ensuring that the trading countries do not retaliate (Suranovic, 2018). Economic activity can only happen on a global scale if the institutional arrangements are in place to support it. Politicians depend on economics in their bid to promote trade winners and find ways to compensate the trade losers.
Suranovic, S. (2010). International trade: Theory and policy. The Saylor Foundation. Retrieved from http://www.saylor.org/books on 25th September 2018.