The Economic Performance Index (EPI): an Intuitive Indicator for Assessing a Country's Economic Performance Dynamics in an Historical Perspective
IMF Working Papers, October 23, 2013
Source details
- Canonical URL
- The Economic Performance Index (EPI): an Intuitive Indicator for Assessing a Country's Economic Performance Dynamics in an Historical Perspective
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Bibliographic details
- Authors: Vadim Khramov, John Ridings Lee
- Published: October 23, 2013
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484381298.001
Overview and purpose
- Proposes a simple metric called the Economic Performance Index (EPI) to measure general macro‑economic performance of a nation, state, or region in a methodologically simple and intuitive way.
- Combines data on inflation, unemployment, government deficit, and GDP growth into a single indicator.
- Designed for simplicity (no complicated mathematical procedures) and uses a descriptive grading system to maximize ease of understanding for professionals and laypeople.
Index construction and variants
- Raw EPI:
- Gives equal weights to its components (inflation, unemployment, government deficit, GDP growth).
- Weighted EPI:
- Constructed as an alternative weighting scheme.
- Empirical finding: both Raw EPI and Weighted EPI perform similarly for U.S. data.
Validation and empirical evidence
- Historical review conducted for the United States from 1790 to 2012.
- Findings from the U.S. historical review:
- The EPI reflects major events in U.S. history, including wars, periods of economic prosperity and booms, economic depressions, recessions, and panics.
- The EPI captures official recessions over the past century.
- The EPI allows for measuring and comparing the relative severity of recessions.
- Despite its simple construction, the EPI dynamics are similar to those of the Chicago Fed National Activity Index (CFNAI) and The Conference Board Coincident Economic Index® (CEI).
Subject areas and keywords (as listed)
- Subject:
- Budget planning and preparation, Economic growth, Economic recession, Government debt management, Inflation, Labor, Prices, Public financial management (PFM), Unemployment rate
- Keywords:
- Budget planning and preparation, economic index, Economic Performance, Economic recession, economic system, EPI indicator, EPI score, Europe, Government debt management, Indicator, Inflation, inflation rate, Raw EPI, Unemployment rate, WP
Notes and disclaimers (as provided)
- This Working Paper should not be reported as representing the views of the IMF.
- The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy.
- Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.
IMF Working Papers — "The Economic Performance Index (EPI): an Intuitive Indicator for Assessing a Country's Economic Performance Dynamics in an Historical Perspective", Vadim Khramov and John Ridings Lee, October 23, 2013.