The document provides an overview of GUIDES, a framework for analyzing key economic indicators of a country. GUIDES stands for Growth and GDP, Unemployment and Utilization, Inflation and Interest Rates, Debt and Deficits, External Balance and Exchange Rates, and Saving and Investment. Each letter represents important indicators that provide insights into a country's current economic performance and sustainability. The document explains the meaning and importance of indicators within each category. It aims to help business leaders and students confidently analyze a country's economic data through this structured framework.

1. Sheet 1Table 1The component of GUIDESGGrowth and
GDPUUnemployment and UtilizationIInflation and Interest
RatesDDebt and DeficitsEExternal Balance and Exchange
RatesSSaving and InvestmentUse TradingEconomics
WebsiteGrowth and GDPUSAArgentinaIndicator
Click Indicator to view website data. Meaning Leading /
Lagging Current Trend Healthy ? Choose One and
explainCurrent Trend Healthy ? Choose One and explainReal
GDP Measures national income and output. GDP is equal to
the total expenditures for all final good and services produced
within the country. Lagging Yes No Not clear Yes No Not
clear Real GDP Growth (annual % change) Percentage change in
GDP Lagging Yes No Not clear Yes No Not clear Gross
Fixed Capital Formation Measures the value of ac- quisitions of
new or existing fixed assets by the business sector. Shows how
much new value the economy added through investment rather
than spending. Leading Yes No Not clear Yes No Not
clear Productivity The real value of output produced by a unit
of labor during a certain time. Lagging Yes No Not clear
Yes No Not clear GDP per
capita PPP
(optional) GDP divided by total population Lagging
Yes No Not clear Yes No Not clear U Unemployment
and UtilizationUnemploy- ment Rate % The percentage of
unem- ployment workers in the total labor force. It is low
during good economics times and high during recessions
Lagging Yes No Not clear Yes No Not clear Capacity
Utilization Rate Measures how much of the productive ability of
the installed capital base in a country is being used. Conversely,
indicates
how much capital is going unused. Coincidental Yes No Not
clear Yes No Not clear Inflation and Interest RatesCPI
Compares current price of a fixed basket of goods. Lagging
Yes No Not clear Yes No Not clear GDP

2. Deflator
(Under “Prices”) Compare prices over time of all output in an
economy. Measures the relationship between nominal and real
GDP. Lagging Yes No Not clear Yes No Not clear
Interest Rate % The price for holding money - time value of
money. Lagging Yes No Not clear Yes No Not clear
Inflation Rate % Represents the long run inflation, transitionary
price changes are excluded. Lagging Yes No Not clear
Yes No Not clear Core Inflation Represents the long run
inflation, transitionary price changes are excluded Lagging
Yes No Not clear Yes No Not clear Debt and
DeficitsGovern- ment Budget Itemized accounting of the
payments received by government (taxes or other fees) and the
payments made by government. A budget deficit occurs when a
government spends more money than it takes in. Lagging
Yes No Not clear Yes No Not clear Debt / GDP The ratio
between a coun- try’s government debt and its gross domestic
product. A low ratio indicates the country is able to sufficient-
ly pay back debts without incurring debts. Lagging
Yes No Not clear Yes No Not clear Govern-
ment
Spending
(optional) Amount of money govern- ment spends on services,
infrastructure, etc. Lagging Yes No Not clear Yes No Not
clear External Debt Debt owed to foreign investors. N/A
Yes No Not clear Yes No Not clear Credit
Rating
(optional) An estimate of the ability of an entity to fulfill their
finan- cial commitments. N/A Yes No Not clear
Yes No Not clear Corporate
Tax Rate
(optional) The tax rate for corporations. Lagging Yes No Not
clear Yes No Not clear Personal
Income
Tax rate
(optional) The tax rate for individuals. Coincidental

3. Yes No Not clear Yes No Not clear External Balance and
Exchange RatesCurrent Account An economy’s proceeds from
trade in good, services, and payments for the factors of
production with the rest of the world. Lagging Yes No Not
clear Yes No Not clear Current Account to GDP Indicator of
sustainability of an economy’s current status. Large deficits
indi- cate heavy borrowing from abroad. Lagging
Yes No Not clear Yes No Not clear Currency A system of
money. The value of the money changes over time. Lagging
Yes No Not clear Yes No Not clear Yearly Currency
Change Measures the amount of change, positive or nega- tive,
in currency’s value over year. Lagging Yes No Not clear
Yes No Not clear Imports
(optional) Amount of good purchased in one country from
another. Lagging Yes No Not clear Yes No Not clear
Exports
(optional) Amount of goods purchased by foreigners from a
country. Lagging Yes No Not clear Yes No Not clear
Saving and InvestmentNet
National
Savings
(use website search field) The sum of private and public
savings. Lagging Yes No Not clear Yes No Not clear
Investment as Percentage
of GDP
(use website search field) Total business spending on fixed
assets, such as facto- ries, machinery, equipment, etc., which
provide the basis for future production. Leading Yes No Not
clear Yes No Not clear Personal Savings When a person
rather than a company saves money to spend or invest later.
Lagging Yes No Not clear Yes No Not clear Foreign
Direct Investment The amount of controlling ownership in a
business enterprise in one country by an entity based in another
country. N/A Yes No Not clear Yes No Not clear Fill in 4
Metrics to Telecommunication - mobile, fixed and
broadbandUSAArgentinaIndicator Meaning Leading / Lagging

4. Current Trend Healthy ? Current Trend Healthy ?
Yes No Not clear Yes No Not clear Yes No Not clear
Yes No Not clear Yes No Not clear Yes No Not clear
Yes No Not clear Yes No Not clear
&"Helvetica,Regular"&12&K000000 &P
You have a new roles the GM (General Manager) of your
company’s new overseas division in Argentina. In preparation,
your boss - who has also received a promotion and will be the
CEO of the new division, has asked you to help with planning
and preparation by researching the economic conditions of
Argentina. You work for a telecommunication (mobile, fixed
and broadband operator)
1. Use the GUIDES (form_assign excel file) template to
research and record key economic information about Argentina
as well as for the United States. You will use this information
to create a report that summarizes your key findings and
highlights any potential high impact economic considerations.
Keep in mind, your home country data will serve as an
important benchmark for interpreting the Argentina’s data.
Background:
Use telecommunication industry for context in this assignment.
Your company is planning to open operations and it is up to you
to assess the economic condition in relation to your company’s
unique profile and needs.
Part 1: GUIDES Template
Complete the GUIDES template during as you learn about the
economic indicators. You can
find all required economic data at Trading Economics
(http://www.tradingeconomics.com) with user info in back info
word doc.

5. TIP: To locate economic indicators not found on the main
landing page, click the “Indicators” drop down menu at the top
of the page to view the full list of available indicators.
Steps:
• Complete section G (GDP & Growth) of the GUIDES
template.
• Complete section U (Unemployment & Utilization) of the
GUIDES template.
• Complete section I (Inflation & Interest rates) of the GUIDES
template.
• Complete section D (Debt & Deficits) of the GUIDES
template.
• Complete section E (External balances & Exchange rates) of
the GUIDES template.
· Complete section S (Saving & Investment) of the GUIDES
template.
Part 2: Analysis Report
Analyze your research findings and develop a 3-4 page report.
Include the following information:
1. Describe the economic state of the country.
o Describe the overall economic health and trends.
o What are the specific indicators that drove your assessment of
this country’s economic condition?
o Which economic indicator(s) do you think is the most
important when considering the impact
on your company’s division? Why?
2. Describe the current business cycle and its implications.
o What stage of the business cycle is the country in? What are
the historical trends? (long-term
expansion, volatile cycles, etc.)
o What does this imply for the growth of your company?
o What stage of the business lifecycle is your company and
industry in?

6. o How would you recommend positioning the company at the
present time to monopolize on
current conditions? Would you change that positioning in the
near future? (i.e. increase
investment to take advantage of low interest rates, use
opportunity to source talent, etc.)
3. What specific economic indicators do you recommend
continuing to monitor closely and why?
o What strategic insight will these indicators provide?
o How frequently do you need to monitor them for changes?
4. Informal bibliography
o Cite your data sources in a format appropriate for any
business or academic setting.
· Typed, double-spaced, using Times New Roman font (size 12)
with one-inch margins on all sides.
· Should include a cover page containing the title of the
assignment and date. The cover page and reference page are not
included in the required page length.
· Should review the following are covered:
· Completed GUIDES template with all required information
· Describe economic state of Argentina
· Describe the current business cycle (recession or expansion
(growth) ) and its complications
· Identify specific indicators that should continue to be
monitored and why?
· Bibliography and paper should meet general clarity, logic,
writing mechanics, and formatting rules
GUIDES: Insight through Indicators
Today’s business leaders are expected to have an informed,
current, and strategic perspective on the economic performance
of a wide range of countries. And they are expected to have it
fast. That challenging task is made more difficult by the

7. absence of a standard method of approaching, synthesizing, and
extracting insights from macroeconomic indicators.
A similar problem confronts students in the business school
classroom. While learning to understand and work with the key
indicators of corporate performance is a standard part of a
modern business school education, much less emphasis is placed
on insightful, quantitative analysis of the economies in which
businesses operate. Students in the classroom too often resort to
ad hoc analyses that miss or misinterpret vital economic
information.
This note introduces an easily remembered framework that
addresses these problems. It can help the business leader and
student to confidently and quickly identify, organize, and
interpret a country’s key economic indicators. Alternatively, it
can help them to evaluate third-party analyses and to compare
such analyses across countries. In either case, this framework
provides a structured way to complete and communicate
analysis of a country’s economic data.
The framework is a simple acronym, GUIDES, in which each
letter stands for a key economic indicator or set of related
indicators. When analyzed together, these indicators give the
business leader or student a vital set of facts with which to
begin forming an intelligent judgment about the current state
and likely future performance of an economy.1
This note is divided into three sections. The first section
describes the components of GUIDES, discussing the meaning
of key indicators referred to by each letter and providing
guidance as to their importance for business leaders. The second
section provides guidance on where to find the data required to
implement GUIDES in either of the two ways mentioned above:
as a checklist for evaluating third-party profiles of economies,
or as a structure for independent analysis. Extensive exhibits at
the end of this note provide a catalog of reliable data sources.2
The third section presents an implementation of GUIDES for
Japan in the “Miracle Years” of 1954–1971. This historical
application of GUIDES illustrates many of the challenges that

8. arise when working with imperfect data and the rewards that
come with identifying indicators that foreshadow the future path
of an economy.
The Components of GUIDES
The purpose of GUIDES is to help the business leader analyze
macroeconomic data with confidence and speed. GUIDES is not
a theory of the macroeconomy or an exhaustive list of the data
one might gather. Instead, it is a carefully selected set of the
primary indicators that analysts look to when gauging a
country’s macroeconomic performance and the stability of that
performance.
The following table summarizes the components of GUIDES
and the indicators that are usually of most help in applying it.
The first three components of GUIDES are generally considered
the fundamental indicators of current macroeconomic
performance. Policymakers and analysts often look first to these
when
gauging the health of an economy. The second three components
are vital indicators of the sustainability of that performance,
and they are carefully watched by international organizations
and investors looking for signs of instability or vulnerability in
national economies.
G: GDP & Growth
The single most important and informative set of economic
indicators relates to a country’s Gross Domestic Product (GDP):
the market value of the final goods and services produced
within a nation’s borders over a given period of time, usually a

9. quarter (reported annualized) or a year. Real GDP measures the
value of these goods and services using the prices from a fixed
“base year,” thereby controlling for changes in prices and
facilitating the comparison of production levels across time.
Real GDP is the standard measure of an economy’s size; that is,
the value of the goods and services a country produces with its
people, equipment, and other resources in a certain period of
time for their ultimate users.
As a matter of accounting, the value of the production measured
by GDP can be divided into four categories: consumption,
investment, government purchases, and net exports. This gives
rise to a well-known accounting identity: GDP=C+I+G+NX.
Every good or service, the production of which is counted in
GDP, falls into these categories. Consumption is the purchase
by domestic households of goods and services for current use. It
makes up about 60% of GDP in developed economies.
Investment is composed of the purchase of goods by businesses
for their use in producing output in a future period (e.g., next
year), purchases of new residential housing, and net
contributions to business inventories. It has historically been
more volatile than consumption, making it a prominent indicator
of the business cycle. Investment also measures what is being
spent by domestic residents to build up or maintain the stock of
productive capital equipment, so it plays an important role in
driving long-term growth. More detail on investment can be
found under the S section of GUIDES. Government purchases
include spending on national defense, education, and other
public goods, but not transfer payments such as welfare benefits
or public pensions. Government purchases as a share of total
output is one measure of a government’s role in the economy,
though in many countries the government controls resources in
other ways as well. Finally, net exports is exports less imports,
where exports are those goods produced domestically but sold
abroad and imports are those goods produced abroad but sold
domestically (imports must be subtracted because GDP
measures domestic production only). The quantity of net exports

10. is closely related to the current account, which is discussed in
detail under the E section of GUIDES.
The growth rate of a country’s real GDP is the specific indicator
most often used to gauge the health of an economy.3 It
measures the rate of increase in the economy’s total output, and
therefore how much more value is being produced in the
economy. For business leaders, a fast-growing economy often
presents substantial opportunities to both sell into a market with
new, higher demand and to produce in an environment that
evidently has the right conditions for expansion.
As important as the growth rate is what is driving that growth.
The decomposition of real GDP growth into increases in capital,
labor, and what economists call total factor productivity (TFP)
indicates the source of an economy’s growth. Growth driven by
capital accumulation (through investment) may signal that an
economy is catching up to its potential by raising its capital-to-
labor ratio to match more developed economies. Growth driven
by an increase in labor is usually due to
the entrance of immigrants or domestic groups (such as women)
into the workforce. Both of these sources of growth face
diminishing returns, so they can drive rapid growth only
temporarily. In contrast, growth due to the more efficient use of
capital and labor, or TFP growth, is sustainable. Though the
causes of TFP growth are unknown, technological progress and
improvements in business management are often cited as key
ingredients. A technical note: When analysts refer to
productivity, rather than TFP, they usually have in mind output
per worker or per unit of labor (such as per hour of work).
Increases in productivity can be caused by increases in TFP,
though they can also be due to an increase in the amount of
capital available for use by labor. Though they measure
somewhat different concepts, productivity and TFP are both
important indicators of the determinants of total output.
The level of PPP-adjusted GDP per capita is the amount of GDP
per person in an economy adjusted for the prices of goods in
that economy relative to a reference country, i.e., adjusted for

11. Purchasing Power Parity (PPP). For example, the output of an
economy with relatively low prices will appear smaller if PPP
adjustments are not made. PPP-adjusted GDP per capita,
therefore, measures the value of what can be consumed, per
person, with the proceeds of an economy’s output, and it often
serves as a measure of the standard of living in an economy.
U: Unemployment & Utilization
The unemployment rate is the percentage of those individuals
looking for work who cannot find it. This definition makes the
unemployment rate a central indicator of the business cycle, as
it captures the imbalance between the supply of and demand for
workers. Though the unemployment rate is usually a lagging
indicator of the overall business cycle, its direct impact on
consumers affects the optimal timing of business investment and
production. For instance, producers of consumer goods may be
less interested in the timing of an overall economic recovery
than in when consumers’ worries over unemployment subside.
Moreover, as long as the unemployment rate remains high
during a downturn, governments are often tempted to provide
economic stimulus through policies that may affect the returns
to doing business.
The average level of the unemployment rate reveals information
as well. A persistently high unemployment rate may indicate
that a friction in the system (such as a high minimum wage,
dismissal costs, or barriers to geographic mobility) is
preventing willing workers and employers from matching. Such
frictions can affect the costs of doing business. However, labor
markets and policies toward them differ substantially across
countries, so a high unemployment rate may instead indicate
that policymakers have prioritized other goals (such as the well-
being of the unemployed) that work against lowering the
unemployment rate. Therefore, careful identification of the
drivers of unemployment in an economy is essential to properly
interpreting the data.
Finally, the unemployment rate provides an important piece of
information about those at the bottom of the economic ladder.

12. By combining data on poverty and income mobility as well as
an in- depth understanding of the political and social dynamics
of a country, business leaders will be better able to foresee
pressures for policies that are perceived to be redistributive.
Often, these policies substantially affect the profitability of
operating in a country.
Capacity utilization provides much the same information as the
unemployment rate, but for factories and equipment rather than
people. It measures how much of the productive ability of the
installed capital base in a country is being used. Therefore, it
also indicates how much of this capital base is going unused,
i.e., is “unemployed.” One important caveat to this indicator is
that capacity
utilization refers to goods production only, neglecting the
service sectors that make up large shares of modern developed
economies.
For business leaders, trends in capacity utilization are a key
leading indicator of overall economic activity. In particular, a
declining utilization rate provides a signal that firms expect
weak demand for their goods in the near future. For reference,
the average value of the capacity utilization rate in the United
States over the long term has been just over 80 percent (the
maximum value is 100).
I: Inflation and Interest Rates
Inflation is the rate of change in the overall price level of an
economy. A conventional measure of inflation is the percent
change in the Consumer Price Index (CPI). The CPI compares
the current price of a fixed basket of a typical consumer’s
purchases to the price of those purchases in a reference, or base,
year. A complementary measure of inflation, the GDP deflator,
compares the prices over time of all output in an economy. Most
countries calculate some form of these measures.
Inflation directly affects the cost of doing business, as cash
holdings deteriorate in value, outstanding debts and accounts
payable become less burdensome, and outstanding loans and
accounts receivable become less valuable with inflation. To

13. minimize the impact of persistent inflation on a business,
counter-measures (such as indexing contracts) become
important.
Inflation usually has implications for a country’s currency as
well. Holding fixed the value of currencies, persistent inflation
raises the price of a country’s exports to other countries. In
response, demand from abroad for the country’s goods is likely
to fall. That fall in demand for exports translates into a fall in
demand for the country’s currency, exerting downward pressure
on its value relative to other nations’ currencies. This can lower
the costs of foreign investment in the country, but it can also
mean diminished returns from operating there.
Finally, because the management of inflation in the world’s
leading economies has been assigned to central bankers who
control the supply of money and interest rates, inflation is often
used as an indicator of the policymaking structure in less
developed economies. In particular, because expansionary
monetary policy tends to spur economic activity in the short
run, politicians may be tempted to ask monetary authorities to
expand the money supply to levels that would raise inflation.
Therefore, inflation can signal the relative importance of
different factors in driving monetary policy.
Short-term nominal interest rates, as the primary tool of
monetary policy, are closely connected with inflation. Interest
rates are the prices at which money can be borrowed. When a
central bank lowers these rates, it is attempting to encourage
individuals and firms to borrow money and spend; in other
words, it is using expansionary monetary policy. The potential
cost of such stimulus is inflation: When a central bank keeps
interest rates persistently low, it risks making money cheap and
pushing up prices. To gauge whether this risk is becoming a
reality, business leaders can look to long-term nominal interest
rates. If borrowers and lenders expect future inflation to be
high, they will agree on higher nominal rates on their long-term
loans. Thus, rising long-term nominal interest rates can signal
expectations of higher future inflation.

14. Interest rates also provide information about the market’s
perception of risk. If a government, or a sector within a country,
is perceived as an increasingly risky debtor, the supply of
capital to it will fall and the interest rate at which it can borrow
will rise. For instance, spreads between the rates paid on
corporate bonds relative to government bonds may indicate that
the corporate sector is perceived to be more risky for lenders.
For businesses, these spreads can translate into a higher cost of
capital.
For each nominal interest rate, there is a real interest rate that
equals the nominal rate less expected inflation. Forward-looking
real interest rates are not available in government statistics
because expected inflation can vary across people with different
beliefs about the future. But, real interest rates measure the
expected cost of borrowing, and are therefore important to
businesses and consumers who are considering whether to
proceed with a project or purchases. In fact, when a central
bank lowers nominal interest rates to spur the economy, it is
doing so in order to lower real interest rates and thereby cause
businesses and consumers to borrow more to fund spending. The
real interest rate therefore plays a key role in specific decisions
by businesses and the business cycle of the overall economy.
D: Debt and Deficits
Many of the world’s most prosperous countries run government
budget deficits and have accumulated sizeable government
debts. While not necessarily a sign of trouble, debt and deficits
can present risks and, as a consequence, substantially affect
policymaking and the costs of doing business.
A technical note: To gauge whether debts and deficits are large,
they must be compared to the ability of the economy to service
them. Therefore, economists recommend measuring debts and
deficits as percentages of GDP. An alternative measure that
focuses on the sustainability of debt is the cost of paying the
interest on the debt relative to the size of the government
budget.
Government debt is how much a country’s government owes to

15. its domestic or foreign lenders. Domestically held debt is how
much the government is borrowing from some of its citizens to
fund current spending in excess of current tax revenue. Because
it will be paid back to the country’s citizens in the future, this
debt is generally seen as less problematic for a country’s
economic stability than is debt owed abroad. At the same time,
the interest expenses of carrying a large debt can weaken a
government’s fiscal health. A technical note: Debt “held by the
public” excludes debt owed by one part of the government to
another and is generally viewed as a better measure of a
government’s debt burden than is total debt.
Business leaders may want to pay particular attention to the
debt owed to foreign lenders. In part because few mechanisms
exist to compel payment across national borders, foreign lenders
who sense increased risk may quickly and substantially reduce
their willingness to lend. In that situation, the borrowing
country can face a serious financial crisis that can lead to
currency devaluation, reduced economic activity, and higher
borrowing costs for the private sector.
A government budget deficit is the amount by which
government spending exceeds its revenue in a given time
period, usually a year. Deficits matter for at least two reasons.
First, they raise the demand for the funds lenders are willing to
supply to a country’s borrowers. This extra demand should, in
principle, raise the price of borrowing, which is the interest
rate. Higher interest rates make some private sector projects too
costly to pursue, a result called “crowding-out.” Though the
extent to which government borrowing crowds-out private
borrowing is uncertain, there is a general consensus among
analysts that increased government borrowing raises businesses’
costs of financing. Second, large deficits must eventually
decline to sustainable levels. For this to occur, barring default
or high inflation that reduces the real value of the debt burden,
government spending must fall or tax revenue must rise.
To reduce deficits and debt, governments may increase taxes.
Business leaders therefore ought to understand the key

16. components of a nation’s tax policy and what changes to it are
most likely if
increased revenue is sought. Of particular interest are the
following: the size of tax revenue relative to GDP, as this
measures the scope for increased taxation; the taxation of
corporate profits, which varies widely across countries and
which is determined in part by (competitive or cooperative)
pressures from other countries; and the evolution of the use of
sales (or value-added) taxes, which in many countries are
becoming a major source of revenue. Though predicting the path
of tax policy is never simple, these indicators will help the
business leader foresee and plan for the leading possibilities.
E: External Balances and Exchange Rates
No evaluation of an economy is complete without an
understanding of its relationship with other economies. While
many external balances contain useful information, a few are
particularly important.
The Current Account (CA) balance is an economy’s net
proceeds from trade in goods, services, and payments for the
factors of production (such as labor and capital) with the rest of
the world. A positive CA balance, which indicates that the
economy is receiving more from its sale of these items to
foreigners than it is paying to foreigners for theirs, is neither
good nor bad on its own. It may reflect high-performing
domestic producers and a successful opening of foreign
markets, or it may reflect weak domestic purchasing power and
distortionary limits on imports from abroad. But, identifying the
factors driving the CA balance can provide important insights
into an economy’s business environment.
As a matter of accounting, the CA balance is equal to the
opposite of the Capital and Financial Account (CFA) balance
(subject to measurement errors and flows of official foreign
currency reserves). The CFA balance is an economy’s net
borrowing from the rest of the world. When an economy runs a
CA deficit (as has the United States in recent years), it runs a
CFA surplus. In other words, when an economy spends more

17. than it earns on trade with the rest of the world, it must borrow
to fund that extra spending.
The CFA balance, when measured as a share of GDP, is a
powerful indicator of the sustainability of an economy’s current
status. An economy can run large CFA surpluses as a share of
GDP, and therefore borrow heavily from abroad, only so long as
foreign investors are willing to lend. If foreign investors
become skeptical of an economy’s ability or willingness to pay
off their debts, the supply of lending will decrease and the
interest rates that the economy pays to borrow will rise. If the
situation deteriorates quickly, foreign lenders may demand
payment on their loans in amounts that an economy’s borrowers
cannot afford. In the ensuing crisis, the economy may default
either explicitly or implicitly, the latter by devaluing its
currency. For business leaders, predicting the onset of these
financial crises can be invaluable.
To gauge whether a large CFA surplus is likely to generate a
volatile economic environment, the business leader may find it
useful to distinguish between two sources of borrowed funds:
Portfolio Investment and Direct Investment. Portfolio
Investment flows are investments by foreigners in domestic
securities that do not exceed a threshold of ownership (e.g.,
10%) in the domestic company. These flows are often called
“hot money” flows because, if an economy is at risk of distress,
these flows can quickly turn negative and exacerbate the crisis.
In contrast, Direct Investment flows typically are concentrated
investments by foreigners who want managerial influence in
domestic companies. These flows are generally thought to be
more stable, as they signal an investor’s long- term commitment
to an economy and are unlikely to be quickly marketable.
One place to look for signs that an economy’s external balances
threaten its stability is exchange rates. The nominal exchange
rate is the price of one currency in terms of another: for
example, the price of U.S. dollars in terms of Japanese Yen. If
the currency’s value relative to others is determined by the
market it is said to be “floating,” whereas a currency with a

18. relative value controlled by the government is said to be
“fixed.” If an economy’s ability to service its debt is in doubt,
currency traders will reduce their demand for that economy’s
currency. In that situation, floating currencies will become less
valuable.
In this way, a floating currency is like any other good: when
demand for it falls or its expected supply rises, its market value
falls and the nominal exchange rates for this currency relative
to others will reflect this depreciation. Seeing currencies in this
way helps the business leader understand how other factors
affect exchange rates. For example, when an economy’s output
is less attractive to consumers abroad, demand for its currency,
and thus the currency’s value, will fall.
As with interest rates, for each nominal exchange rate there is a
real exchange rate. A real exchange rate is the price of goods
and services in one country in terms of goods and services in
another, and it is equal to the nominal exchange rate divided by
the ratio of prices in the two countries. In general, competition
among firms would cause goods that can be easily traded across
borders to sell at the same price around the world, so real
exchange rates ought to equal one (i.e., 1.0) in the long run,
though they typically fluctuate along with nominal exchange
rates in the short run.
The logic that real exchange rates should equal one in the long
run can provide valuable insight to business leaders. Suppose a
country has severe inflation but its nominal exchange rate is
held temporarily fixed by the government (which may be
worried that investors will flee if the currency is seen to be
weak). Knowing that the real exchange rate is not equal to one,
the business leader can anticipate either deflation or a severe
devaluation of the currency and take action to insulate the
business from—or take advantage of—these events.
S: Saving and Investment
An economy’s rate of saving is the share of its output that it
sets aside for future rather than current use. An economy’s total
domestic saving, called national saving, is made up of public

19. saving and private saving. Public saving is the government’s
budget surplus, while private saving is done by individuals and
businesses.
National savings can be lent to businesses and individuals to
fund investment, which is the purchase of assets that will
generate production in later periods. Because existing
equipment and skills deteriorate over time, investment is
imperative for an economy that wants to maintain or increase its
standard of living. Many of the most successful development
stories of the last several decades have been in countries, such
as China, with very high investment rates.
While domestic savings are a natural source of funds for
investment, an economy may temporarily invest more than it
saves by borrowing funds for investment from abroad.
Investment exceeding domestic saving can be a sign of a robust
economy that is attracting foreign investors. But, it can also
reflect that the economy’s residents are neglecting to save. And
while foreign savings can substitute for domestic savings in
funding domestic investment, there is a tradeoff. When
investment is funded from abroad, a portion of the returns to
production and, in the case of equity investments, the
productive assets themselves, are owned by foreign investors.
Therefore, an economy can support substantial investment and
claim the returns to it only if domestic savings are sufficient to
fund it.
Special Topics: Thinking outside GUIDES
While the indicators included in GUIDES can help generate
insights into a country’s macroeconomic performance, at times
the following special topics may be particularly valuable
additions to a GUIDES analysis.
Forecasts of macroeconomic performance can
suggest whether trends seen in the GUIDES analysis are
expected to continue, and they directly measure the confidence
that the public and expert analysts have in a country’s
macroeconomy. See Exhibit 1: Sources for Forecast Data.

20. Measures of a country’s Competitiveness and
Country Risk Assessments provide information on how easy it
is to operate a business in a country, incorporating measures of
regulatory restrictions as well as political stability. See Exhibit
2: Sources for Competitiveness and Country Risk Data.
Public Opinion Data can help a business leader
gauge the direction of policy in a country. See the Harvard
Kennedy School Library and Knowledge Services Public
Opinion Research Guide
http://www.hks.harvard.edu/library/research/guides/?guide=opin
ion and Exhibit 3: Sources for Regional Information.
Using GUIDES in the Real World: Where to Find What Is
Needed
Business leaders can use the GUIDES framework in two ways to
develop insights about an economy. First, they are most likely
to use it as a checklist against which to evaluate country
profiles prepared by a third party. Consumers of these profiles
generally have limited ability to identify what is missing from
them, but GUIDES makes that task much simpler. Second, when
a proprietary or especially detailed analysis of a country is
required, GUIDES provides a structure for completing an
independent analysis of an economy using raw data.
One key challenge in either approach to analyzing an economy
is knowing where to look for the necessary information and
data. In this section, we identify and discuss the key sources
upon which business leaders can rely. Most major academic,
public, and corporate libraries staff reference librarians to help
locate and explain these resources.4 At the end of this section,
we briefly discuss where to look for data not explicitly included
in the framework that may be valuable for specific country
analyses.
Third-Party Country Profiles
If the business leader’s objective is to develop a comprehensive,
insightful perspective on an economy in a short period of time,
third-party country profiles are a good choice. For example, the

21. CFO of an EU consumer products company considering
expanding into Latin America may want to compare the market
opportunity there to what it was in Eastern Europe 10 years
earlier, when the company first began operating in that region.
Key to that comparison will be an understanding of the
components of GUIDES for the two regions, as consumer
demand is driven by the performance of the macroeconomy and
the sustainability of that performance. Third-party profiles of
the two regions (or of the major countries within the regions)
are likely to provide sufficient data and analysis to make
this comparison possible, even with a tight deadline. GUIDES
enables the CFO to check off the key indicators while digesting
these profiles, lending confidence that the analysis is complete
and making it easy to communicate findings to others.
The best of these profiles provide an overview of the
macroeconomy, politics, and demography of a country, mixing
trenchant analysis with key data. Other useful profiles may
focus on a particular facet of a country such as its commercial
sector or trade activities. A list of such sources is in Exhibit 4:
Sources for Country Profiles, and a few of the key sources are
briefly described here.
Many of the most important sets of profiles are paid for on
subscription by firms and research libraries. Subscription
sources are often more current, exhaustive, and user-friendly
than freely available sources. In addition, they often have
someone available to answer questions about the data. The
Economist Intelligence Unit, affiliated with the publisher of the
magazine, is a leading subscription-based provider of country
profiles as well as of the data that inform them. Its coverage
spans most of the countries in the world, and it is heavily relied
on for the depth of its research as well as its breadth. For
emerging markets, the ISI Emerging Markets database is an
excellent resource. This user-friendly database is set up with a
view for each country that provides macroeconomic data as well
as reports on industries and companies in that country. The S&P

22. Ratings Direct database is particularly useful for obtaining an
overview of the financial situation in a country.
Free and reliable sources for country profiles do exist, however.
The CIA World Factbook, for example, covers a broad range of
countries and provides perspective on a wide range of topics,
including economics. The dominant free source, however, is the
set of International Governmental Organizations (IGOs),
including the United Nations, International Monetary Fund,
World Bank, and Organization for Economic Cooperation and
Development. Each of these organizations prepares analyses of
national economies (some are subscription-only), and their
affiliation with governments helps ensure quality and accuracy
of their reports. The IMF Country Reports and the OECD
Economic Surveys are two prominent sets of such profiles.
When using GUIDES to evaluate third-party country profiles,
the business leader will often find that a component of the
framework is missing or underemphasized by the profile. In
response, it is usually wise to check another source’s profile for
the missing information. This also allows for a check on the
accuracy of the first profile. If a number of profiles fail to
address a component of GUIDES that the business leader thinks
may be important, the next step is to try to fill that gap by
finding the appropriate raw data. For this situation, and for the
scenario in which a fully independent country analysis is
required, the business leader needs to know where to look for
specific macroeconomic indicators.
Raw Data
If the business leader’s objective is to develop a unique, subtle,
and insightful perspective on an economy and sufficient time is
available, third-party profiles may provide only a starting point
for the desired analysis. Instead, direct analysis of the economic
data may be required. This is a daunting task, as the data
available can seem difficult to navigate. While GUIDES helps
the business leader organize the data, finding and understanding
the data is a prerequisite to analyzing it.
Providers of this sort of data can range from governmental

23. agencies to private research organizations. As mentioned above,
third-party profile providers often offer data along with their
analyses. Depending on the business model of the source,
information might be available from free
websites or a subscription service. For lists of such sources see
Exhibit 5: IGO Sources for Country Economic Data, and Exhibit
6: Non-IGO Sources for Country Economic Data.
International governmental organizations (IGO) that either set
or evaluate policy are dominant providers of a wide variety of
data published in print and on the web. Having a better sense of
their mandates and organizational structure can sometimes be
helpful in determining which source is most likely to produce
the data of interest. For some background information on some
of these key IGOs, see Exhibit 7: International Government
Organizations [IGOs] and their role in generating data.
Similarly, regional organizations such as the European Union’s
statistical office, Eurostat, can be particularly helpful when
searching for data within or about a specific geographic area or
zone. These regional sources will often also provide statistics at
the metropolitan or city level. For a list of suggested sources,
see Exhibit 3: Sources for Regional Information.
Statistical organizations within the U.S. government are
excellent sources for foreign data as well. For an example of
this, see the chapter on “Comparative International Statistics” in
the annual Statistical Abstract of the United States. In addition,
specific topics are often uniquely well-covered by U.S.
government entities, e.g., the Energy Information Agency
provides a vast amount of international and domestic data on
the energy industry and markets.
Most countries (though not the United States) have a central
statistical agency. These agencies are invaluable sources of raw
data for GUIDES analyses. A list of portals to these agencies
and other statistical data specific to countries is provided in
Exhibit 8: Country Information Portals. In general, these portals
link to reliable data sources. Nevertheless, the business leader
using raw data, especially for countries with less well-

24. developed civil administrations, ought to be cognizant that data
are sometimes disputable. While the previous sources are
recommended for initial investigations, searching the Internet
may also prove important. For guidance on this see Exhibit 9:
Guidance on how to effectively search for information on the
Internet.
Finally, it is worth noting one under-utilized source for making
the best use of raw data: printed versions of datasets. Often, the
business leader looking at electronic data will be surprised by
reported figures or confused by the technical terms used to
describe the data. The paper publications of these data often
offer accessible explanatory material and alternative
breakdowns of data that can reveal insights hidden in the online
version. For example, it is recommended that business leaders
review the IMF’s International Financial Statistics (IFS)
monthly publication alongside the data they retrieve from the
IFS online product.
Challenges When Using Country Data
Accurate use of country-specific data sources requires the
business leader to be aware of the differences across countries
in how data are collected, organized, and presented.
For example, data categories may be unfamiliar in countries
with atypical institutional structures, and research may be
required to map them into the categories commonly understood
in the business community, such as those used in GUIDES.
More commonly, the categorization of data will be familiar, but
the English used to describe the categories will not, as
translation into abbreviated descriptions can be difficult. One
example of this comes from the Central Bank of Brazil’s Annual
Report, vol. 42, 2006.5 That report’s Table 1.3 is titled “GDP
real change rates—under the prism of production.” Translated to
common terminology, that means “GDP—real growth rates by
industry. “
Fortunately, most sources provide a telephone number and email
address for inquiries. A telephone call usually elicits a faster
response and allows for two-way conversations that lead to

25. more accurate resolutions of confusion. In general, the staffs at
statistical agencies are happy to explain and discuss the details
of the data they work so hard to compile and communicate.
Of course, intentional manipulations and unintentional
distortions to data are a real risk, especially at lower levels of
government or in countries with weaker administrative
infrastructures. General guidelines on evaluating data from
websites are presented in Exhibit 10: Evaluating the credibility
of free content on the Internet. To give a sense for the
inaccuracies that find their way into official data, consider the
following case.
According to the Nigerian national government, the population
of Lagos State, the most industrialized in the country, is 9
million.6 According to Lagos State itself, however, its
population is 17.5 million.7 This is no counting error. The
national government is controlled by one ethnic group that
wants to minimize the size of Lagos State, while Lagos State is
controlled by another ethnic group that wants to maximize the
size of Lagos State.
Political distortions to data are rarely this glaring, but knowing
the political interests of the source of the data is an important
component in assessing its reliability.
Much more often, technical considerations make data less
reliable than it might at first appear. As long as these technical
issues are unchanged over time, the trends in an indicator are
likely to be informative even if the level of the indicator is
unreliable or disputed. For example, variation in the size of the
informal economy makes unemployment rates for some
countries mean something very different from what they mean
for others. As long as the informal economy stays the same size
relative to the formal economy, however, a given change in the
reported unemployment rate is likely to indicate a true
underlying trend.
One challenge to analysis is when indicators that seem to
measure the same thing have subtle definitional differences that
generate large differences in what they report. For example, the

26. U.S. Bureau of Labor Statistics has a household survey and an
establishments (firms) survey, both of which measure the status
of the labor market. Surprisingly, they sometimes imply
markedly different patterns for employment, a divergence that
has generated substantial study and debate over the last decade.
The business leader trying to navigate such a situation will want
to be aware, as much as possible, of these uncertainties when
they materially affect the appraisal of economic performance.
Fortunately, such debates are usually prominently discussed by
the agencies that provide the data or in press coverage of the
data.
Finally, avoiding mistakes in using country data is sometimes
simply a matter of following one’s intuition that the figures
seem suspect. In these cases, it is wise to turn to trusted sources
to confirm the data. One such resource is the set of IMF Article
IV Consultation staff reports. In these reports, filed
every year or two, IMF representatives discuss the economies of
member countries with local officials and publish their results.8