06 July 2011

Gauging the Temperature of Emerging Economies

The above chart is The Economist's 'Overheating Index.' As any comparative measure, it does not show the entire picture. It becomes further muddled by aggregating all of the factors into a single score. Nevertheless, I did no expect to see Brazil so close to 'boiling over.' One of the new darlings of development, I was under the impression that there is good reason to be confident in the progress of the home of the beautiful game.
Countries are first graded according to the risk of overheating suggested by each indicator (2=high risk, 1=moderate, 0=low). For example, if the growth in excess credit is more than 5% it scores 2 points, 0-5% 1 point, and below 0% nil. The scores from each indicator are then summed and turned into an overall index; 100 means that an economy is red-hot on all six measures.
I tend to like what The Economist offers with their daily chart. I think I post something from the feed about as often as Ezra Klein does so for TED's Daily Video. I highly suggest subscribing to their RSS feed.