International Comparison of Economic Performance Index: The Case of the USA, Japan and Korea

Abstract

With explicit consideration of structural changes, this paper constructs the Economic Performance Index (EPI) by integrating economic growth rate, inflation rate, unemployment rate and the ratio of current account relative to Gross Domestic Product (GDP). Intranational analyses and international comparisons of EPIs of the USA, Japan and Korea have been performed. The intranational analyses indicate that the EPI of each country properly reflects economic situation and performance, respectively. Especially in case of Korea, the EPI dropped substantially at the end of each political regime due to political instability. Findings from international comparisons are as follows. Firstly, the EPI of Korea is more affected by other countries than those of the USA and Japan. Specifically, Korean economic growth and the balance of payments are largely affected by Japan while the inflation rate is largely affected by the USA. Secondly, while the EPI of the USA is virtually not affected by Japan or Korea, the inflation rate and balance of payments of the USA are slightly affected by Japan. Lastly, even though the EPI of Japan is mostly affected by the USA, Korea and the USA have almost the same effect on the balance of payments of Japan.