How do you measure economic stability? (2024)

Achieving economic stability is like trying to balance many levers at the same time. On measuring it, many aspects have to be combined.On one hand, you need to achieve economic growth that is sustainable over long period of time. This growth has to reflect into jobs and hence lower unemployment rate. This growth has also to be balanced so as not to ignite inflation and get it out of control. The fruits of this growth has to be distributed so that you have income inequality in check and poverty rate decreasing over time.And for emerging economies, you need to have a stable balance of payment and war chest of foreign reserves to avoid run on your currency that can ruin all your efforts as a country to achieve sustainable economic growth.

good definition to the economic growth I think this should be in line with better transparency level that gives indication on decreasing corruption costs

Measuring economic stability, especially in an economy heavily dependent on the oil sector involves assessing a range of economic indicators and factors that provide insights into the overall health and resilience of the economy. Here are some key measures and considerations:- Oil Price Volatility- Government Revenue Diversification- Fiscal Deficits and Government Debt- Foreign Exchange Reserves- Economic Growth- Inflation Rate- Current Account Balance- Sovereign Wealth Funds- Policy Responses- Political and Geopolitical Stability- Social and Economic Indicators

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There are two main types of inflation: 1-demand-pull inflation 2-cost push inflation Demand-pull inflation occurs when aggregate demand the total amount of goods and services that are demanded exceeds aggregate supply the total amount of goods and services that are supplied, this can happen when the economy is growing too quickly or when the government introduces too much stimulus into the economy.Cost-push inflation occurs when the cost of producing goods and services increases. This can happen due to factors such as rising wages, higher energy prices, or supply chain disruptions.

Economics is a function of human behavior which is not stable by nature. Economist always forget this fact. That’s why long run economic stability is more of a dream . Let’s not forget about the very ancient school of economics in Egypt . We always have seven years up and seven years down . This is how the world goes on and on .

It's important to recognize that GDP growth, by itself, doesn't encompass all dimensions of economic welfare. Factors such as disparities in income, accessibility to education and healthcare, and the sustainability of the environment are also vital elements to gauge the holistic state of an economy and the quality of life of its residents. Consequently, government officials and policymakers frequently rely on a blend of economic metrics to guide their informed choices regarding economic policies and interventions.

One vital gauge of economic stability is the unemployment rate, which represents the proportion of the labor force actively searching for work yet unable to secure positions. A stable, low unemployment rate indicates efficient workforce utilization, ensuring that the majority of job seekers can locate suitable employment. Conversely, a prolonged high unemployment rate suggests a potential underutilization of human resources, resulting in adversity, impoverishment, and social isolation for many. As a result, policymakers frequently prioritize decreasing unemployment through diverse strategies, encompassing investments in education, training, subsidies, and regulatory actions.

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I think unemployment is viewed from the wrong perspective, especially in emerging markets. For instance, in Nigeria unemployment was previously calculated - not based on the International Labor Organization's (ILO) method. Thus, Nigeria’s statistics office mostly produced large unemployment rates. However, once the ILO’s method was adopted, the local unemployment rate drastically adjusted downward. Nigeria’s informal sector is probably 70% of its total economy, and based on the prior calculation method, many local informal sector agents were previously considered to be unemployed. These economic agents collectively generate significant monies, daily, some of which the government cannot even account for. Poor welfare is the real issue here.

The fourth crucial metric for economic stability is the balance of payments, which highlights the disparity between a nation's overall transactions with the rest of the world. When a country maintains a balanced or surplus balance of payments, it indicates that it's earning more than it's expending in global trade and financial interactions, demonstrating a strong and competitive global position. Conversely, when there's a deficit or an unstable balance of payments, it suggests that the country is outspending its earnings in international trade and finance, revealing a vulnerable and precarious standing in the global economy. Consequently.

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Behavioral economics can be tied to international trade. In my opinion, an equilibrium or surplus balance of payment partly depends on a nation’s citizens’ preference for local products. China is a prime example of this, the more the Chinese have been encouraged to believe in China’s domestic products, the richer the country has gotten overtime. Citizens buying their own locally made products strengthens their local currency, as there is a fast circular flow of income, thereby expanding the economy. This, in my mind, is even one of the reasons why the U.S. got to the top earlier in its history.

The economic freedom index serves as a more comprehensive fifth measure of economic stability. It evaluates how a nation's institutions and policies support individual freedoms, market efficiency, and adherence to the rule of law. A consistently high economic freedom index indicates the presence of a strong and reliable economic system, resulting in increased prosperity, security, and opportunities for its citizens. Conversely, a low or inconsistent economic freedom index suggests that the nation's economic system is flawed and unstable, leading to reduced well-being, security, and freedom of choice among its populace. As a result.

Keep an eye out for the following:HDI - Human Development Index (life expectancy, education, income)Gini coefficient - not index per se, but good indicator of inequalityGCI - Global Competitiveness Index (12 "pillars", for example: infrastructure, macroeconomic stability, health, education, and innovation)