Measuring Globalization of Economy as a Tool for Designing Economic Policys’ Strategies

Abstract

Measuring globalization of economy has become a challenge for academic profession, international governmental organizations and advisory institutions in the last fifteen years. Various indicators and methodologies are subject of polemics that often reflect viewpoints of institutions and individuals respectively. Most of these approaches have two common characteristics, namely, they measure globalization results and are mainly based only on a very general definition of globalization. This paper introduces the systemic approach towards measuring globalization of economy, which is based upon the theoretical comprehension of national competitiveness and economic growth. The main purpose of such approach is to emphasize the importance of holistic view on a globalized economy. Thus, the significance of measuring globalization of economy is to get the information not only on the position but also on the potentials of economy for international integration. In the empirical part of the paper, the composite indicator of globalized economy is developed by the principal components analysis. Then the ordinary least squares and panel regression analyses confirm the hypothesis that globalized economies achieve higher long-term cumulative economic growth.

Keywords: measuring globalization, systemic approach, principal components analysis, composite indicators, regression analysis, Slovenia