Measuring Macroeconomic Instability: A Critical Survey Illustrated with Export Series

For at least 40 years, the analysis of the causes and consequences of macroeconomic instability has greatly deepened our understanding of the handicaps faced by developing countries. This concern on economic instability is evidenced by a broad spectrum of indicators, based on the deviation of observed values of a given economic aggregate from its reference or trend value. In general, the choice of this or that indicator is not discussed advocating that the resulting instability indicators are closely correlated. Focusing on measurements of instability in export revenue data for 134 countries from 1970 to 2005, this paper finds that this assertion may be true for variance-based indicators, measuring the average magnitude of deviations from the trend. However, great discrepancies may arise between different measures of the asymmetry or of the occurrence of extreme deviations around the trend when different trend computation methods are used. Our purpose is, therefore, to invite further discussions regarding the use of these indicators, and to highlight the different dimensions of instability, which have been so far unheeded by the economic literature.