A Complete History Of American Economic Performance Since 1790 In Two Charts

Business Insider

IMF researchers Vadim Khramov and John Ridings Lee have developed a new macro indicator called the "Economic Performance Index" — a measure that combines data on inflation, unemployment, government deficits, and GDP growth.

"Though structurally simple, the EPI is a powerful macro indicator that clearly measures the performance of the economy’s three primary segments: households, firms, and government," write Khramov and Lee in an IMF working paper. "The EPI comprises variables that influence all three sectors simultaneously:  the inflation rate as a measure of the economy’s monetary stance;  the unemployment rate as a measure of the economy’s production stance;  the budget deficit as a percentage of total GDP as a measure of the economy’s fiscal stance; and  the change in real GDP as a measure of the aggregate performance of the entire economy."

The basic calculation goes something like this: start with a "perfect" score of 100, then subtract the inflation rate, the unemployment rate, the government budget deficit as a percentage of GDP, and add back the real GDP growth rate  (it's slightly more complicated than that — check out the paper for details).

The annotated charts below plot the history of the U.S. EPI since 1790.

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