KOF Index

• KOF Index of Globalisation

  • Produced annually by the Swiss Institute for Business Cycle Research
  • KOF = konjunkturforschungsstelle 
• • It's a composite index combining 24 indicators spread across three categories:
  • Economic globalisation 
  • Social globalisation
  • Political globalisation
• • Economic globalisation 
  • Measured by indicators like cross-border trade, FDI, tariff rates and money flows.
• Social globalisation

  • Measured by international telephone calls, tourist flows, resident foreign population and access to foreign internet, households with a TV set, and 'global affinity' (presence of international TNC retail outlets), international mail, import and exports of books.
• • Political globalisation
  • Measured by: foreign embassies in a country, membership of international organisations, number of UN Peacekeeping missions participated in, trade and other agreements with foreign countries.  
• Each indicator is converted into an index value. Where data is missing, the most recently available data is substituted. 

  • Scaled average calculated to give a separate index value for each country. 
  • Mean of three category indices calculated to give the overall globalisation index. 
  • 2015's data is available for 207 countries. 
  • Index calculated since 1970 (158 countries 1970-2006)
  • This allows comparisons over time.
  • Economic globalisation has risen faster than political or social since 1970. 
• Developed countries top the list, with emerging countries mid-way and developing at the bottom. Positive correlation between globalisation and development?In 2016, the Netherlands and Ireland topped the list, then Austria, Switzerland. There were only two non-European countries in the top 15, Singapore and Canada. 
• Small European countries top the list. This is because:

  • The USA and BRICs have lower index values because the KOF index measures international interactions - internal flows between diverse regions in large countries (each the size of a small country) are not recorded. Large parts of the interior of the USA are not well connected to the rest of the world. 
• Small European countries top the list. This is because:

  • Small countries have short distances to neighbouring countries, fewer domestic attractions and a smaller domestic market. 
  • High European indicator value reflects the very large interactions within the EU. Suggests the decision to join a trade bloc effective in promoting globalisation. 
• • Technological developments mean that some indicators look dated, e.g. international mail, given the rise of email and social media, and trade of books given ebooks. 
  • Trade flows will not include informal economy flows. Will understate degree of globalisation in developing and emerging countries. 
  • Choice and weighting of indicators is value of judgement, and may contain cultural bias (e.g. no. of McDonald's restaurants)
  • Fewer missing or estimated data is increasing accuracy and comparability. 
  • Large number of indicators incorporates wide range of international connections.