Global Macro-economic analysis
"The macro-economics affects our lives in both obvious and subtle ways."
Introduction
How do you rate the economy in your country?
I know this might be a big question which you have no clue of. You might not even care about it. But think about how prevalent the macro-economic is to us, how it affects our lives in both obvious and subtle ways. I understand that those technical factors are convoluted. Even knowing the importance, we are reluctant to analyse the world economy because it involves dull numbers and texts. If you feel the same way, do not worry. They say "A picture is worth a thousand words". Data visualization using Vega-Lite makes it more interesting to read. Through this article, I am trying to demostrate how those economic indicators could more vivid and hopefully you can obtain insights on global macro-economic situation. Before reading on, bear in mind that I am merely an expert in Economics (only at high-school level) so the analysis might be a constraint. Also, it is better to have a little knowledge on Economics like what GDP is.
Economic Growth
“The first panacea for a mismanaged country is monetary inflation, the second one is war” - Ernest Hemingway
Let's takes an example of the U.S:
According to the bar chart, the U.S has always been ranked to have the highest.
When selecting the bar of the U.S, you can see that only points of the U.S being highlighted. From 1974 - 1981, the U.S has experienced the soared inflation, ranging from 5.5% to 9.5%. This is because there were Central bank policy, the abandonment of the gold window, wage and price controls under Nixon administration, Keynesian economic policy, and market psychology contributing to high inflation in 1970s.
Another interesting thing is that Japan, the U.K and the U.S experienced its highest inflation between 1973 and 1975. Could you find out what happened during those years?
Trade
!! graph 2
“That foreign trade should be fair rather than free.” — Lyn Nofziger
For many years, countries strives to make a balance of trade, so as to maintain the relative strength of its economy. A country that imports more goods and services than it exports in terms of value has a trade deficit while a country that exports more goods and services than it imports has a trade surplus. In 2019, Germany had the largest trade surplus (5.8%) followed by China (1.2%) and Japan(0.2%). Whereas the U.S had the largest trade deficit, even with the ongoing trade war with China, beating out the U.K.
Impact of Sector to GDP
!! graph 3
“Globalisation cannot be holded off or turned off: it is the economic equivalent of a force of nature – like wind.”
- William J. Clinton
Which certain sector has higher dependency ?
In a nutshell, GDP is the entire market value of all goods and services a country produces within a certain amount of time. The charts illustrates the change of the contribution across the three sectors. Interestingly, the top 5 economies do not rely on the agriculture as most of them weights less than 15%. Maybe it is because the foods can be imported from other countries. Across the years, the most important drives come from the sector of service, with more than 40%.
Speaking of China — the highest-growth country, the contribution from the sectors of agriculture and industrial have been receding meanwhile the service sector rise rapidly. We can tell that China is going through a economic transformation. A question in my mind is that since the contribution of agriculture has been decreasing dramatically, do you think China can support themselves without any imported foods?
Fertility and Longevity
!! graph
“Our demographic dividend is our strength. The youth have what it takes to engage with the latest technology.”
- Narendra Modi
How do you use this chart?
You can move the pan of the scatterplot to view the points in details. Move around the Year bar to view its correlation by year. And select the country in the legend to highlight those points belonging to those regions
Why do we take account of fertility and longevity into an economy?
Good question! Let me introduce you a term called Demographic Dividend.
It means the economic growth brought on by a change in the structure of a country’s population, usually a result of a fall in fertility and mortality rates. If the population is large enough (≥ 100M) like China, and people are leading a long lifespan, it means that its working condition is satisfactory enough to increase the productivity. This is important as it boosts per capita income. To measure the Demographic dividends, you can also look at the savings, labor supply, human capital, and economic growth of the countries.
Foreign Investment
!! graph 3
“Do not put all eggs in one basket.” - Warren Buffet
Foreign investment refers to the investment in domestic companies and assets of another country by a foreign investor. They can be made by individuals, but are most often endeavors pursued by companies and corporations with substantial assets looking to expand their reach. A simple sense is that a high inflow from country means that the country has a high potential growth. So, if you move around the year bar below the chart, you can perceive that the inflow is always larger than the outflow, meanwhile Japan always goes conversely. Perhaps we can say that as globalization increases, many multinational corporations will seek new opportunities for economic growth by opening branches and expanding their investments in countries like China.
Human Development Index (HDI)
!! graph
“Economic growth without investment in human development is unsustainable – and unethical.” - Amartya Sen
The Human Development Index (HDI) is a statistical tool used to measure a country's overall achievement in its social and economic dimensions. The social and economic dimensions of a country are based on the health of people, their level of education attainment and their standard of living. The map here shows that most of the countries in Asia and South America are having the values around 70% ; and countries in Africa have the values below around 60%; and countries in Europe, Canada, Australia and the U.S are of high development with valued roughly 90%. Therefore, we can infer that countries in Africa have the lowest standard of living with a relatively poor health of people; meanwhile countries like the U.S result conversely.
Limitation to this analysis
- 1. The based year is affected by the datasets. So, originally the default year is set to 2005.
- 2. Some data is unavailble.
- 3. The limitation of Vega-Lite.
Conclusion
“It is not by augmenting the capital of the country, but by rendering a greater part of that capital active and productive than would otherwise be so, that the most judicious operations of banking can increase the industry of the country.”
- Adam Smith
There we easily reach the end of the analysis. We conclude that even though the economic cycles occurred, the economy around the globe has boomed in the long term. For the decades, the HDI has improved; the population keeps growing; life expectancy is prolonging; the foreign investment's official flow are maintained healthily; income and inflation have been increasing. Amazingly, these information are presented in data visualization using Vega-Lite at ease.
Economics is much more complicated than this, but simpler than you thought. I hope you can trying tweaking around the dull numbers into some beautiful graphs, and eventually find insights.
Design and development by Jason Ching Yuen, Siu.