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Go Back   Freemason Hirams Travels Masonic Forums > Social Science > Economics

Economics Economics

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Old 03-21-2008, 10:01 PM
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How to (simply) measure convergence between two variables, in economics?

Let me first say this is just A-level Economics standard, so there's no point getting to complicated with this.

I'm doing a project and I've got time series data in Excel for the Eurozone and UK for things like inflation, GDP etc. The project is basically how converged the UK and Eurozone are in macroeconomic terms, and I'd like to be able to use these data to produce a numerical value of convergence.

The best I've come up with is using the correlation coefficient formula between the two sets of data. As you can tell, I'm no statistician but this doesn't seem to work very well, as for one it doesn't actually take into account differences between the data. (ie Inflation 1%, 2%, 3% would be perfectly correlated with inflation 8%, 9%, 10%, although it clearly isn't converged)

I've also tried measuring the correlation of moving averages to smooth out fluctuations, but this had the opposite effect.

Anyone got any ideas here that I can use to put a numerical value on convergence, then?
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