The External Sector Development Index (Sxi)

Abstract

This paper introduces an alternative index to measure the external sector from different perspectives. Called "External Sector Development Index (SXi)," this index is a new analytical tool for studying the trend of external sector in any country or region.

The SXi is strongly affiliated with the Openness Index. The difference between these two indices is that the SXi includes Foreign Direct Investment (FDI) in its analysis while the Openness Index does not. This paper assumes that FDI is one new import item in any country. In the measurement of SXi need to used three basic growth rates: namely, Trade Volume Growth Rate, FDI amount Growth Rate and GDP Growth Rate into its analysis. The simultaneously application of these three growth rates in Sxi makes it possible to observe the trend of the external sector of any country or region from a global perspective.

Keywords: trade liberalization, openness, international trade

JEL Classification: F41