World Economy: 10 years at a glance

Every agent that makes financial decisions whether political institution, investor, or family should make use of economic indicators. There are a wide variety of indicators, but understanding only a few macroeconomic indicators is already enough to know about the state of the economy. Economic growth , inflation and labor market are the most important indicators to start any economic conjuncture analysis.

The GDP indicator can’t alone tell about the distribution of income or the quality of life of a population, but it is useful to estimate the size of an economy and growth rate. The Gross Domestic Product is the monetary value of all finished goods and services made within a country during a specified period. There are three ways to calculate the GDP: via expenditures, production or incomes. And also there are several kinds of GDP indicators: nominal GDP, real GDP, GDP growth rate and GDP per capita.

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For our purposes, to compare GDP between other countries, we are going to use GDP per capita. Another good use of GDP per capita is that we can verify if the product of an economy is growing due to the growth of a population or not.

The ten countries with the highest GDP per capita between 2010 and 2018 didn’t change much. Remaining in the first positions: Luxembourg, Ireland, Norway, Switzerland, United States and Saudi Arabia.

To observe the inflation between different countries, we will use CPI indicator, the Consumer Price Index. This measures the level of prices over time. Many studies indicate a positive relation between inflation and economic growth in the short run, but in the long run the relation is negative. High levels of inflation indicates an inefficient economic policy, and means an alert to the investors.

In 2010 and 2013 Greece and Switzerland presented the highest inflation among other European countries. In 2016, Brazil was in first, followed by Turkey, Colombia, Russia.

Another important indicator is the level of employment. The higher the level of employment, the higher the optimism investors, and of course the income generated.

From 2010 to 2018 the countries with the highest employment rate were Iceland and Switzerland. On the other hand, South Africa and Greece presented the highest unemployment rate from 2010 to 2018.

Regarding the United States economy, the level of economic growth, inflation and federal funds rate remained stable during the period between 2010 and 2019, with the unemployment rate decreasing since 2010. The unemployment rate in 2018 is much lower than in 2010.

data and notebook: https://github.com/marilynle

my portfolio: https://marilynle.github.io