Estimating Barro misery index in democratic states with application in Albania: 2005 – 2014

Abstract

In the present study we develop a statistical analysis of the Barro misery index and its components in contemporary democratic states with application in Republic of Albania during the period January 2005- December 2014. BMI is calculated by the formula: BMI = ? + u – GPD + i, where BMI denotes quarterly Barro misery index, ? denotes quarterly inflation rate, u denotes quarterly unemployment rate, GDP denotes quarterly real GDP growth rate, i denotes nominal long-term interest rate. Kolmogorov’s Central Limit Theorem is a fundamental theorem of Modern Probability Theory “Fair game” and “Effective market in week sense” are important concepts of Macroeconomics. Some results of the study include : Kolmogorov’s Central Limit Theorem is not valid for quarterly inflation rates in Albania during the period January 2005- December 2014 at the confidence 99. 9%. The inflation process in Albania during the specified period, related to the quarterly inflation rate, is an unfair game at the confidence 98. 8%. The inflation process in Albania during the specified period, related to the quarterly inflation rate, is not effective at the confidence 97. 5% Kolmogorov’s Central Limit Theorem is not valid for quarterly unemployment rates in Albania during the specified period at the confidence 99. 9%. The unemployment process in Albania during the specified period, related to the quarterly unemployment rate, is an unfair game at the confidence 99. 9%. The unemployment process in Albania during the specified period, related to the quarterly unemployment rate, is not effective at the confidence 99. 9% The official data of the quarterly GDP growth rate for Albania during the specified period contradict Kolmogorov’s Central Limit Theorem at the confidence 77. 1%. The GDP growth rate process for Albania during the specified period is a fair game at the confidence 86. 4%. The GDP growth rate process for Albania during the specified period is not effective at the confidence 99. 9%. The official data of the quarterly Barro misery index for Albania during the specified period contradict Kolmogorov’s Central Limit Theorem at the confidence 96. 1%. The Barro misery index for Albania during the specified period is a fair game at the confidence 84. 8%. The Barro misery index process for Albania during the specified period is not effective at the confidence 63. 7%.