Measuring global economic activity

A number of economic studies have used a proxy for world real economic activity derived from shipping costs. This measure turns out to depend on a normalization that has substantive consequences, of which users of the index had been unaware prior to this paper. This paper further evaluates this and alternative measures in terms of treatment of trends, coherence with world output, and correlation with commodity prices. I conclude that measures derived from world industrial production offer a better indicator of global real economic activity.

Automated summary

Various economic studies have used a proxy for global economic activity based on shipping costs. This study reveals the importance of normalization in this measure and concludes that indicators derived from world industrial production provide a better reflection of global economic activity.