G LO B A L I Z AT I O N
I N D I C ATO R S
ECONOMIC GLOBALIZATION IN SIERRA LEONE - PART ONE
DOMESTIC PERSPECTIVES
I
n part one we attempt to quantify
economic globalization in figures and
graphs so we can literally visualize it
whilst it is occurring right here in Sierra
Leone. By all accounts the globalization
phenomenon is one of the most difficult
to quantify for obvious reasons; its multidimensionality, which includes familiar concepts such as cultural integration
is by far the most comprehensive.
The graphical representation is somewhat tricky; however, at The Investor
we narrowed it down to a number of
digestible variables. Countries with
a small economy have to be global to
survive by default, because of their size
they seem to always come out on top.
For example, Sierra Leone is heavily dependent on imports. Larger and much
more developed economies like Europe
and USA tend to score lower because of
their size. We will explore this further,
but for now let’s have a working definition of globalization.
For the purposes of our exercise we will
narrow it down to a meaning that can
be graphically represented, and for this
reason we have chosen the KOF definition amongst many. In fact there are
so many definitions that you might get
lost in finding one that is universally accepted.
The KOF Index of Globalization was
introduced in 2002 (Dreher, published
in 2006) and is updated and described
in detail in Dreher, Gaston and Martens
(2008). The overall index covers the
economic, social and political dimensions of globalization. Following Clark
(2000), Norris (2000) and Keohane
and Nye (2000), it defines globalization
to be the process of creating networks of
connections among actors at multi-con
tinental distances, mediated through a
variety of flows including people, information and ideas, capital and goods.
More specifically, the three dimensions
of the KOF index are defined as:
•
•
•
Economic Globalization
Political Globalization
Social Globalization
Consequently, two indices are constructed that include individual components suggested as proxies for globalization in the previous literature.
Actual Flows and Restrictions, whilst
the former measures actual economic
flows this includes data on trade, FDI
and portfolio investments. Restrictions
refer to restrictions on trade and capital using hidden import barriers, mean
tariff rates and taxes on international
trade as a share of current revenue. In
part two, we will be examining Political
Globalization. The forecasted current
account gives us a part picture of how
globalized we are in terms of economics.
Economic Globalization, characterized
as long distance flows of goods, capital
and services as well as information and
perceptions that accompany market exchanges; broadly speaking, economic
globalization has two dimensions.
First, actual economic flows are usually
taken to be measures of globalization.
Second, the previous literature employs
proxies for restrictions to trade and
capital.
Economic Globalization Data 2009- 2011
Annual Growth Data 2013- 2016
Further measures include export and
import growth measured against the
level of FDI. For a positive economic
globalization index we should expect to
see a positive FDI growth yearly.