A. Evaluating the performance of an economy...
1. An economy's performance can be defined in many ways, depending upon the performance criteria, methods of measurement and weights attached to each criterion when overall performance is calculated (the performance index).
- The choice of criteria is up to the analyst.
2. Four steps to follow:
a. The analyst’s definition of performance
b. The identification of performance indicators for each criterion.
c. The measurement of these performance indicators for each criterion.
d. The compilation of a performance index for cross-comparisons.
- Includes weighting - must be made explicit.
3. Criterion examples.
- Economic growth (change in GDP or GDP per capita)
- Economic stability (low inflation, stable exchange rate, low unemployment, etc.)
International balance of trade, external debt and debt service ratios.
Socioeconomic factors (e.g. literacy, caloric intake, telephones, mortality, etc.)