Macroeconomic Composite Index for Economic Stability: A Kaldorian Analysis for the Algerian Economy

Abstract

The Algerian economy has known many changes in foreign trade policy and adopted many economic reforms in order to achieve the main goal of the economic policy (Economic Stability). In the present paper, we propose a macroeconomic composite index for economic stability to analyze and evaluate the implications of these changes on the economic stability of the country or the performance of the adopted economic policies since the 1980s, by a single index number per year, which we call the Economic Stability Index (ESI), through Kaldor’s four macroeconomic variables (GDP, General level of prices, Employment ,and External balances) based on “The Magic Square” and the quantitative formulation of the “Normalized Magic Square” presented by Medrano-B & Teixeira (2013). As a result, the best period that the Algerian economy has known was the period reflected by the highest value of the ESI, through achieving favorable results for the four indicators simultaneously.