The Index of Economic Independence: A New Measure of an Economy's Ability to Survive Unilaterally

Abstract

Abstract: The objective of this article is to fill an existing gap in the literature by constructing an index which attempts to assess the degree of a nations immunity to economic risk by quantifying its level of economic independence and its ability to survive unilaterally. To do so, and following the conventional methodology of indices, the article first identifies the dimensions underlying economic independence and then selects the various indicators that best reflect each dimension. It then normalizes each indicator by using its highest and lowest historic goalposts. Finally, it averages the composite index using specific weights assigned first to each indicator and second to each dimension. The economic independence index, which was constructed for 112 countries, provides a gauge to such countries on where they stand in terms of economic resilience and how much risk they face if they were to stand alone economically, or pursue policies that are undesirable from the perspective of more economically powerful countries. This index thus provides a tool for governments to measure the direction and magnitude of government action needed to improve their respective nations� level of economic independence. � 2017, Journal of Economic Issues / Association for Evolutionary Economics.