Improvements in Positive Peace precede future economic shifts
Data shows that peace and economic performance can be mutually reinforcing.
Research from the Institute for Economics and Peace (IEP) shows that understanding changes in Positive Peace within a country can help predict economic performance.
After analysing five major macroeconomic indicators with IEP’s Global Peace Index (GPI) and Positive Peace Index (PPI), findings show that not only can peace and economic performance be mutually reinforcing, but that IEP’s measures of Positive Peace can signal future levels of peace and macroeconomic outcomes.
According to the data, changes in Positive Peace are associated with changes in a number of macroeconomic indicators such as gross domestic product (GDP) growth, foreign direct investment and credit ratings.
Between 2005 and 2016, countries that were improving in Positive Peace had an average 2 per cent per annum higher GDP growth rates than countries deteriorating in Positive Peace.
The data shows that every 1 per cent improvement in Positive Peace corresponds with 2.9 per cent growth in real GDP per capita.
Increases in Positive Peace are also associated with a 1.4 per cent per annum average appreciation in the domestic currency, while a deterioration in Positive Peace is associated with a 0.4 per cent average depreciation.
Non-OECD countries that improve in Positive Peace had, on average, 1.45 percentage points higher annual GDP growth between 2005 and 2016 compared to those that deteriorated in Positive Peace.
Again, in non-OECD countries, those that deteriorated significantly in Positive Peace from 2010 to 2016 had an average fall in their credit rating of 4.8 points on a scale of zero to 22.
Positive Peace, as defined by IEP, is the attitudes, institutions, and structures that create and sustain peaceful societies. IEP analyses Positive Peace with the Positive Peace framework, which includes eight interrelated “pillars” or factors of economic and social progress. Through the analysis of thousands of cross-country measures, IEP has determined which factors have statistically significant relationships with actual peace.
The term peace is widely understood as a condition or environment without violence, or the fear of violence, yet Positive Peace represents the underlying condition that creates the optimum environment for human potential to flourish.
IEP has developed unique methods to assess different types of peace. The annual GPI measures a country’s level of “negative peace,” or the level of harmony achieved by the absence of violence or the fear of violence. The PPI measures a country’s capabilities to build and maintain peace by using the eight pillars as a framework for analysis.