DOCSLIB.ORG

The Corona Crisis Vs. the Great Depression

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
The Corona Crisis Vs. the Great Depression THE CORONA CRISIS VS. THE GREAT DEPRESSION BY BEN CARLSON, CFA A WEALTH OF COMMON SENSE MARCH 31, 2020 Making economic or market comparisons to the Great Depression is almost always ridiculous… until now, that is. The daily price swings we’ve seen in the last month were beginning to 10 Worst Daily Losses rival what happened during the 1929-1932 period. The worst 10 daily October 19, 1987 -20.5% returns since the late 1920s are dominated by the Great Depression, October 28, 1929 -12.9% 1987, the Great Financial Crisis, and this month. March 16, 2020 -12.0% October 29, 1929 -10.2% Two out of the six worst days ever have come in the past couple of November 6, 1929 -9.9% weeks. Being on the same table as 1987 and 1929 data is typically not March 12, 2020 -9.5% a good thing. October 18, 1937 -9.1% Michael Batnick shared this chart last week: October 5, 1931 -9.1% October 15, 2008 -9.0% December 1, 2008 -8.9% DOW JONES INDUSTRIAL AVERAGE Past performance is not indicative of future results. 25-Day Absolute Average Return S&P 500: 1928-2020 Past performance is not indicative of future results. Source: Bloomberg. The levels of volatility over the past month are worse than anything markets saw in 2008 or 1987 and are on the doorstep of Great Depression levels. Things have been that crazy. Distributed with permission under limited license. All data and charts presented herein are from sources deemed to be reliable but are not guaranteed to be accurate. The financial information presented is for informational and educational purposes and is not a substitute for professional advice; use or reliance of any information herein is solely at your own risk. Edited from the original. THE CORONA CRISIS VS. THE GREAT DEPRESSION Bank of America found this 30% drawdown in stocks was faster than any other period in history: THE FEB-MAR 2020 SELLOFF OF 30% WAS THE FASTEST 30% DRAWDOWN IN HISTORY Source: BofA Global Research, Bloomberg. Trading days from peak. The economic output we’ll see in the coming months Years Length GDP may also look Great Depression-esque. 1836–1838 2 Years -32.8% 1839–1843 4 Years -34.3% The St. Louis Fed’s back of the envelope calculation 1847–1848 1 Year -19.7% says the unemployment rate could get as high as 32% 1853–1854 1 Year -18.4% next quarter. During the Great Depression, the 1857–1858 1 Year, 6 Months -23.1% unemployment rate reached 25%. 1860–1861 8 Months -14.5% One member of the Fed says it’s possible GDP falls 1865–1867 2 Years, 8 Months -23.8% 50% from the shutdown. The scary GDP estimates 1873–1879 5 Years, 5 Months -33.6% we’re seeing these days are annualized, so it may not 1882–1885 3 Years, 2 Months -32.8% be as bad as it sounds, but those are still contractions 1887–1888 1 Year, 1 Month -14.6% 1890–1891 10 Months -22.1% we haven’t seen in many decades. 1893–1894 1 Year, 5 Months -37.3% During the Great Recession, GDP “only” fell 5.1%. 1895–1897 1 Year, 6 Months -25.2% The average GDP decline since 1948 is -2.3%, with 1899–1900 1 Year, 6 Months -15.5% the worst point coming during the 2007-2009 1902–1904 1 Year, 11 Months -16.2% contraction. The United States hasn’t experienced a 1907–1908 1 Year, 1 Month -29.2% double-digit decline in economic activity since the 1910–1912 2 Years -14.7% post-WWII recession, but prior to that is was 1913–1914 1 Year, 11 Months -25.9% commonplace. 1918–1919 7 Months -24.5% 1920–1921 1 Year, 6 Months -38.1% Depending on when things get back to normal, it’s 1923–1924 1 year, 2 Months -25.4% possible 2020 won’t end up on this list, but this will 1926–1927 1 Year, 1 Month -12.2% likely be one of the worst U.S. recessions of the past 1929–1933 3 Years, 7 Months -26.7% 100 years. 1937–1938 1 Year, 1 Month -18.2% 1945 8 Months -12.7% Source: National Bureau of Economic Research (NBER) 2 THE CORONA CRISIS VS. THE GREAT DEPRESSION With so many companies impacted by the shutdown from the pandemic, the coming earnings numbers are going to fall off a cliff as well. Using data from Robert Shiller, I looked at the history of earnings declines going back to 1871: S&P 500® INDEX EARNINGS DRAWDOWNS: 1871-2019 Source: Shiller. Corporate earnings fell more than 70% during the Great Depression. Earnings numbers fell more from 2007-2009, but this figure is difficult to compare over different historical periods because the rules on how companies account for earnings have changed over time. But, it’s possible the fall in quarterly earnings could rival some of history’s worst drawdowns too. Some people will look at these numbers and assume we’re heading down a similar path as the depression. I don’t know how bad things are going to get, because the economy has never been effectively shut down like it is at the moment. I’m hopeful a massive recovery is on the other side of this once everything goes back to normal, but that’s not guaranteed. However, there are a number of differences between 1929-1932 and its aftermath and the current situation. The Fed. The Federal Reserve was still relatively new during the Great Depression, having been founded just 16 years prior. Not only did they pour gasoline on the fire during the speculative period leading up to the crash, but they did next to nothing in trying to stop the crisis as it was unfolding. John Kenneth Galbraith once wrote, “The Federal Reserve Board in those times was a body of startling incompetence.” In the current crisis, the Fed has acted fast and they’ve gone big. Central banks around the globe have pumped liquidity into the system to make sure the plumbing of the financial markets continues to function. This was not happening during the Great Depression, and it’s one of the reasons there was a run on the banks and a huge number of bank failures. Government Spending. During a severe economic contraction, individuals and corporations spend less money so it’s typically up to the government to make up for this shortfall. During the Great Depression, they did the opposite. Republicans and Democrats alike sought to balance the budget and cut spending. Even in 1932, at the depths of the depression, they wanted to shrink government spending by 25%. Today, we’re 3 THE CORONA CRISIS VS. THE GREAT DEPRESSION getting $2 trillion in fiscal stimulus rescue funds, plus another $4 trillion in loans from the Fed. It’s likely we’ll need even more government spending, depending on how long it takes to beat the virus. The Great Depression saw a reduction in government spending, while we’re going to throw 10% of GDP at this thing (and potentially more). Here are a few other things that didn’t exist during the Great Depression—Social Security, the SEC, Medicaid & Medicare, FDIC insurance, or unemployment insurance. Many of these programs were created in the aftermath of the depression, so most people had no backstop at the time, which only made things worse. This is one of the reasons a bona fide recovery didn’t take place in the years following the downturn. The unemployment rate was still 20% in 1938, a full six years after the Great Depression had ended. The lack of a social safety net is one of the reasons a generation of Depression Babies changed their saving and spending habits following the crash for years to come. If the government continues to help with fiscal rescue packages, that may not be the case this time around. Markets. Financial markets and the financial services industry, in general, were both far less mature in the 1920s and 1930s. Leading up to the 1929 crash, only around 1% of the population was invested in stocks, mostly on margin, and traded them in bucket shops (which were glorified casinos). Today, 50% of Americans are invested in the stock market. Back then there were no 401(k)s or IRAs or periodic contributions into the market. There were no sovereign wealth funds, financial advisors, target date funds, or computer-based trading strategies building diversified portfolios of assets that were rebalancing from bonds to stocks in the midst of the crash. At the worst point during this drawdown, U.S. stocks were down roughly 34%. To get to the level of losses seen during the Great Depression, stocks would have to fall another 30% from there. Then they would have to fall another 30% from there. Next would be another 30% loss from that point, and yet another 30% decline from there. We would need to have four additional 30% losses before reaching Great Depression-era losses. Could this happen? Anything is possible. However, in the markets, you can’t simply invest based on what’s possible, but rather what’s probable. In some ways, the economic backdrop of the coming months will be similar to the Great Depression. In other ways, we are far better off. I don’t know how things will play out, because they weren’t dealing with a global pandemic back then.1 But, I am hopeful our response to the crisis this time around means things won’t get as bad as they did during the 1930s.
Load more

Recommended publications
  • AVAILABLE from a Price Index for Deflation of Academic R&D
    DOCUMENT RESUME ED 067 986 HE 003 406 TITLE A Price Index for Deflation of Academic R&D Expenditures. INSTITUTION National Science Foundation, Washington, D.C. REPORT NO NSF-72-310 PUB DATE 72 NOTE 38p. AVAILABLE FROMSuperintendent of Documents, U.S. Government Printing- Office, Washington, D.C. 20402 ($.25, 3800-00122) EDRS PRICE MF-$0.65 HC-$3.29 DESCRIPTORS Costs; Educational Finance; *Educational Research; Financial Problems; *Financial Support; *Higher Education; Research; Research and Development Centers; *Scientific Research; *Statistical Data ABSTRACT This study relates to price trends affecting research and development (R&D) activities at academic institutions. Part I of this report provides the overall results of the study with limited discussion of measurement concepts, methodology and limitations. Part II deals with price indexes and deflation-general concepts and methodology. Part III discusses methodology and data base and Part IV describes alternative computations and approaches. Statistical tables and charts are included.(Author/CS) cO Cr` CD :w U S DEPARTMENT OF HEALTH EDUCATION & WELFARE OFFICE OF EDUCATION THIS DOCUMENT HASBEEN REPRO DUCED EXACTLY ASRECEIVED FROM THE PERSON OR ORGANIZATION ORIG INATING IT POINTS OFVIEW OR OPIN IONS STATED DONOT NECESSARILY REPRESENT OFFICIALOFFICE OF EDU CATION POSITION OR POLICY RELATED PUBLICATIONS Title Number Price National Patterns of R&D Resources: Funds and Manpower in the United States, 1953-72 72-300 $0.50 Resources for Scientific Activities at Universi- ties and Colleges, 1971 72-315 In press Availability of Publications Those publications marked with a price should be obtained directly from the Superintendent of Documents, U.S. Government Printing Office, Washington, D.C.
    [Show full text]
  • Does Google Search Index Help Track and Predict Inflation Rate? an Exploratory Analysis for India
    Does Google Search Index Help Track and Predict Inflation Rate? An Exploratory Analysis for India By G. P. Samanta1 Abstract: The forward looking outlook or market expectations on inflation constitute valuable input to monetary policy, particularly in the ‘inflation targeting' regime. However, prediction or quantification of market expectations is a challenging task. The time lag in the publication of official statistics further aggravates the complexity of the issue. One way of dealing with non-availability of relevant data in real- time basis involves assessing the current or nowcasting the inflation based on a suitable model using past or present data on related variables. The forecast may be generated by extrapolating the model. Any error in the assessment of the current inflationary pressure thus may lead to erroneous forecasts if the latter is conditional upon the former. Market expectations may also be quantified by conducting suitable surveys. However, surveys are associated with substantial cost and resource implications, in addition to facing certain conceptual and operational challenges in terms of representativeness of the sample, estimation techniques, and so on. As a potential alternative to address this issue, recent literature is examining if the information content of the vast Google trend data generated through the volume of searches people make on the keyword ‘inflation' or a suitable combination of keywords. The empirical literature on the issue is mostly exploratory in nature and has reported a few promising results. Inspired by this line of works, we have examined if the search volume on the keywords ‘inflation’ or ‘price’in the Google search engine is useful to track and predict inflation rate in India.
    [Show full text]
  • Burgernomics: a Big Mac Guide to Purchasing Power Parity
    Burgernomics: A Big Mac™ Guide to Purchasing Power Parity Michael R. Pakko and Patricia S. Pollard ne of the foundations of international The attractive feature of the Big Mac as an indi- economics is the theory of purchasing cator of PPP is its uniform composition. With few power parity (PPP), which states that price exceptions, the component ingredients of the Big O Mac are the same everywhere around the globe. levels in any two countries should be identical after converting prices into a common currency. As a (See the boxed insert, “Two All Chicken Patties?”) theoretical proposition, PPP has long served as the For that reason, the Big Mac serves as a convenient basis for theories of international price determina- market basket of goods through which the purchas- tion and the conditions under which international ing power of different currencies can be compared. markets adjust to attain long-term equilibrium. As As with broader measures, however, the Big Mac an empirical matter, however, PPP has been a more standard often fails to meet the demanding tests of elusive concept. PPP. In this article, we review the fundamental theory Applications and empirical tests of PPP often of PPP and describe some of the reasons why it refer to a broad “market basket” of goods that is might not be expected to hold as a practical matter. intended to be representative of consumer spending Throughout, we use the Big Mac data as an illustra- patterns. For example, a data set known as the Penn tive example. In the process, we also demonstrate World Tables (PWT) constructs measures of PPP for the value of the Big Mac sandwich as a palatable countries around the world using benchmark sur- measure of PPP.
    [Show full text]
  • RBC International Index Currency Neutral Fund
    RBC International Index Currency Neutral Fund Investment objective Performance analysis for Series A as of August 31, 2021 To provide long-term capital growth, while Growth of $10,000 Series A $21,632 minimizing the exposure to currency 26 fluctuations between foreign currencies and the 22 Canadian dollar, by tracking the performance of its benchmark through investment, primarily, in 18 units of iShares Core MSCI EAFE IMI Index ETF (CAD-Hedged). 14 10 Fund details 6 Load Fund Series Currency 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 YTD structure code A No load CAD RBF559 Calendar returns % 30 Inception date October 1998 Total fund assets $MM 557.8 20 Series A NAV $ 12.90 10 Series A MER % 0.62 0 Income distribution Annually -10 Capital gains distribution Annually -20 Sales status Open Minimum investment $ 500 Subsequent investment $ 25 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 YTD Risk rating Medium -12.4 16.4 25.7 5.1 3.6 5.7 14.9 -10.8 22.8 0.4 16.0 Fund Fund category International Equity 2nd 2nd 2nd 1st 4th 1st 3rd 3rd 1st 3rd 1st Quartile Benchmark 100% MSCI EAFE IMI Hedged 100% to 1 Mth 3 Mth 6 Mth 1 Yr 3 Yr 5 Yr 10 Yr Since incep. Trailing return % CAD Net Index 2.0 3.5 12.4 28.3 8.3 9.6 9.4 4.6 Fund 4th 4th 1st 1st 2nd 2nd 2nd — Quartile Notes 713 710 699 669 567 430 221 — # of funds in category Fund’s investment objective changed April 9, 2019 and June 30, 2017.
    [Show full text]
  • World Trade Statistical Review 2021
    World Trade Statistical Review 2021 8% 4.3 111.7 4% 3% 0.0 -0.2 -0.7 Insurance and pension services Financial services Computer services -3.3 -5.4 World Trade StatisticalWorld Review 2021 -15.5 93.7 cultural and Personal, services recreational -14% Construction -18% 2021Q1 2019Q4 2019Q3 2020Q1 2020Q4 2020Q3 2020Q2 Merchandise trade volume About the WTO The World Trade Organization deals with the global rules of trade between nations. Its main function is to ensure that trade flows as smoothly, predictably and freely as possible. About this publication World Trade Statistical Review provides a detailed analysis of the latest developments in world trade. It is the WTO’s flagship statistical publication and is produced on an annual basis. For more information All data used in this report, as well as additional charts and tables not included, can be downloaded from the WTO web site at www.wto.org/statistics World Trade Statistical Review 2021 I. Introduction 4 Acknowledgements 6 A message from Director-General 7 II. Highlights of world trade in 2020 and the impact of COVID-19 8 World trade overview 10 Merchandise trade 12 Commercial services 15 Leading traders 18 Least-developed countries 19 III. World trade and economic growth, 2020-21 20 Trade and GDP in 2020 and early 2021 22 Merchandise trade volume 23 Commodity prices 26 Exchange rates 27 Merchandise and services trade values 28 Leading indicators of trade 31 Economic recovery from COVID-19 34 IV. Composition, definitions & methodology 40 Composition of geographical and economic groupings 42 Definitions and methodology 42 Specific notes for selected economies 49 Statistical sources 50 Abbreviations and symbols 51 V.
    [Show full text]
  • Market Briefing: MSCI Currency Indexes
    Market Briefing: MSCI Currency Indexes Yardeni Research, Inc. October 1, 2021 Dr. Edward Yardeni 516-972-7683 [email protected] Joe Abbott 732-497-5306 [email protected] Please visit our sites at www.yardeni.com blog.yardeni.com thinking outside the box Table Of Contents TableTable OfOf ContentsContents Figures All Country World MSCI 3 All Country World ex-US MSCI 4 BRIC MSCI 5 Developed Europe MSCI 6 Developed World ex-US MSCI 7 EAFE MSCI 8 Emerging Markets MSCI 9 EM Asia MSCI 10 EM Eastern Europe MSCI 11 EM Latin America MSCI 12 EMU MSCI 13 Europe MSCI 14 Europe ex-United Kingdom MSCI 15 October 1, 2021 / MSCI Currency Indexes Yardeni Research, Inc. www.yardeni.com All Country World MSCI Figure 1. 800 865 750 ALL COUNTRY WORLD MSCI INDEX 815 700 (ratio scale) 10/1 765 650 715 665 600 Local currency 615 550 565 500 US$ 515 450 465 400 415 350 365 300 315 250 265 200 215 yardeni.com 150 165 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Source: MSCI. Figure 2. 1.00 1.00 ALL COUNTRY WORLD MSCI INDEX CURRENCY RATIO (US$ index / local currency index) .95 .95 .90 .90 10/1 .85 .85 .80 .80 yardeni.com .75 .75 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Source: MSCI.
    [Show full text]
  • Measuring the Great Depression
    Lesson 1 | Measuring the Great Depression Lesson Description In this lesson, students learn about data used to measure an economy’s health—inflation/deflation measured by the Consumer Price Index (CPI), output measured by Gross Domestic Product (GDP) and unemployment measured by the unemployment rate. Students analyze graphs of these data, which provide snapshots of the economy during the Great Depression. These graphs help students develop an understanding of the condition of the economy, which is critical to understanding the Great Depression. Concepts Consumer Price Index Deflation Depression Inflation Nominal Gross Domestic Product Real Gross Domestic Product Unemployment rate Objectives Students will: n Define inflation and deflation, and explain the economic effects of each. n Define Consumer Price Index (CPI). n Define Gross Domestic Product (GDP). n Explain the difference between Nominal Gross Domestic Product and Real Gross Domestic Product. n Interpret and analyze graphs and charts that depict economic data during the Great Depression. Content Standards National Standards for History Era 8, Grades 9-12: n Standard 1: The causes of the Great Depression and how it affected American society. n Standard 1A: The causes of the crash of 1929 and the Great Depression. National Standards in Economics n Standard 18: A nation’s overall levels of income, employment and prices are determined by the interaction of spending and production decisions made by all households, firms, government agencies and others in the economy. • Benchmark 1, Grade 8: Gross Domestic Product (GDP) is a basic measure of a nation’s economic output and income. It is the total market value, measured in dollars, of all final goods and services produced in the economy in a year.
    [Show full text]
  • STATISTICS BRIEF Purchasing Power Parities – Measurement and Uses
    STATISTICS Purchasing power BRIEF parities – measurement 2002 March No. 3 and uses by Paul Schreyer and Francette Koechlin How does one compare economic data between countries that is expressed in units of national currency? And in particular, how should measures of production and Gross Domestic Product (GDP) be converted into a common unit? One answer to this ques- tion is to use market exchange rates. While straightforward, this turns out to be an unsatisfactory solution for many purposes – primarily because exchange rates reflect so many more influences than the direct price comparisons that are required to make In this issue volume comparisons. Purchasing Power Parities (PPPs) provide such a price compari- son and this is the rationale for the work of the OECD and other international organisa- 1 What are PPPs? tions in this field (see chart 1). The OECD publishes new sets of benchmark PPPs every three years, drawing on detailed international price comparisons. Every time a new set of 2 Who uses them? benchmark PPPs is released, this also gives rise to a new set of international compari- 3 How to measure sons of levels of GDP and economic welfare. economic welfare, ... 3 ... the size of economies, ... What are PPPs? 4 ... productivity ? In their simplest form, PPPs are price relatives, which show the ratio of the prices in 5 Comparing price levels national currencies of the same good or service in different countries. A well-known 5 Inter-temporal compari- example of a one-product comparison is The Economist’s BigMacCurrency index, sons: using current presented by the journal as ”burgernomics”, whereby the BigMac PPP is the conversion or constant PPPs rate that would mean hamburgers cost the same in America as abroad.
    [Show full text]
  • Chapter III World Trade and GDP, 2019-20
    Chapter III World trade and GDP, 2019-20 World trade and GDP 18 Merchandise trade volume 19 Primary commodity prices 21 Exchange rates 22 Value of world trade 23 COVID-19 and trade 26 Outlook for 2020 29 1016 World merchandise trade volume declined by The COVID-19 pandemic is likely to produce 0.1 per cent in 2019, the first contraction since a significant contraction of world trade in the global financial crisis of 2008-09. Trade was 2020. New export orders for manufacturing weighed down by persistent trade tensions as and services shown in purchasing managers’ well as by weaker global GDP growth, which indices (PMIs) fell sharply in the first and second slowed to 2.3 per cent in 2019 from 2.9 per cent quarters of 2020. in 2018. Trade declined in US dollar terms in 2019. GDP growth turned negative in the first quarter World merchandise exports fell 3 per cent of 2020 for the United States (-1.2 per cent), to US$ 18.89 trillion. World commercial the euro area (-3.8 per cent) and China services exports increased by 2 per cent to (-9.8 per cent). Further declines are expected US$ 6.07 trillion but the pace of growth was in the second quarter and beyond. down sharply from the 9 per cent recorded in 2018. 1117 World Trade Statistical Review 2020 World trade and GDP The volume of world merchandise trade declined in 2019 for the first time since the financial crisis of 2008-09, weighed down by rising trade tensions and weakening economic growth.
    [Show full text]
  • Globalization Report 2020 – How Do Developing Countries and Emerging Markets Perform?
    Globalization Report 2020 – How do developing countries and emerging markets perform? Globalization Report 2020 – How do developing countries and emerg- ing markets perform? Thieß Petersen and Hauke Hartmann Globalization Report 2020 – How do developing countries and emerging markets perform? | Page 3 Contents 1 Introduction ...................................................................................................... 4 2 Globalization development between 1990 and 2018 .................................... 4 3 Globalization, growth, and prosperity ........................................................... 9 4 Empirical research on the connection between globalization and GDP growth .................................................................................................... 13 5 Development of absolute differences in real GDP per capita between industrialized countries and emerging markets ......................... 16 6 Globalization and the developing countries ............................................... 19 7 Implications for economic policy ................................................................. 21 Literature ................................................................................................................ 22 Page 4 | Globalization Report 2020 – How do developing countries and emerging markets perform? 1 Introduction Every two years, the Globalization Report examines how well individual countries have benefited from the pro- gressing globalization since 1990. The influence of changes of the
    [Show full text]
  • Integration of CPI and PPP: Methodological Issues, Feasibility and Recommendations
    Organisation de Coopération et de Développement Economiques Organisation for Economic Co-operation and Development Integration of CPI and PPP: Methodological Issues, Feasibility and Recommendations University of New England, Australia Agenda item n° 4 JOINT WORLD BANK – OECD SEMINAR ON PURCHASING POWER PARITIES Recent Advances in Methods and Applications WASHINGTON D.C. 30 January – 2 February 2001 INTEGRATION OF CPI AND PPP: METHODOLOGICAL ISSUES, FEASIBILITY AND RECOMMENDATIONS D.S. Prasada Rao School of Economics University of New England Australia Paper for presentation at the World Bank-OECD Seminar on Purchasing Power Parities: Recent Advances in Methods and Applications, 30 January-2 February, 2001, Washington,DC. This paper is based on a revision of a background paper prepared for the DECDG of the World Bank. The paper is written for inclusion as an appendix in the CPI Manual currently under preparation by the Inter-secretariat Working Group on Price Statistics. The author acknowledges comments from John Astin, Bert Balk, Yonas Biru, Yuri Dhikanov, Jong-goo, Alan Heston, Bill Shepherd, Ralph Turvey, the Statistics Directorate of the OECD and the PPP Section of the National Accounts Section at the OECD. The current version represents a major revision of the original paper since its form and content are significantly influenced by the comments received. The author, of course, remains responsible for any remaining errors. The findings, interpretations, and conclusions expressed in this paper are entirely those of the author. They do not necessarily represent the views of the World Bank, its executive Directors, or the countries they represent. 1. Introduction 1. Consumer price index (CPI) and purchasing power parity (PPP) conversion factors share conceptual similarities.
    [Show full text]
  • The Economist Intelligence Unit's Quality-Of-Life Index
    THE WORLD IN 2OO5 Quality-of-life index 1 The Economist Intelligence Unit’s quality-of-life index The Economist Intelligence Unit has developed a new Life-satisfaction surveys “quality of life” index based on a unique methodol- Our starting point for a methodologically improved ogy that links the results of subjective life-satisfaction and more comprehensive measure of quality of life is surveys to the objective determinants of quality of life subjective life-satisfaction surveys (surveys of life satis- across countries. The index has been calculated for 111 faction, as opposed to surveys of the related concept of countries for 2005. This note explains the methodology happiness, are preferred for a number of reasons). These and gives the complete country ranking. surveys ask people the simple question of how satisfi ed they are with their lives in general. A typical question Quality-of-life indices on the four-point scale used in the eu’s Eurobarometer It has long been accepted that material wellbeing, as studies is, “On the whole are you very satisfi ed, fairly measured by gdp per person, cannot alone explain the satisfi ed, not very satisfi ed, or not at all satisfi ed with broader quality of life in a country. One strand of the the life you lead?” literature has tried to adjust gdp by quantifying facets The results of the surveys have been attracting that are omitted by the gdp measure—various non- growing interest in recent years. Despite a range of early market activities and social ills such as environmental criticisms (cultural non-comparability and the effect of pollution.
    [Show full text]