IMF-Adapted ND-GAIN Index

The IMF-adapted ND-GAIN index is an adaptation of the original index, adjusted by IMF staff to replace the Doing Business (DB) Index, used as source data in the original ND-GAIN, because the DB database has been discontinued by the World Bank in 2020 and it is no longer allowed in IMF work. The IMF-adapted ND-GAIN is an interim solution offered by IMF staff until the ND-GAIN compilers will review the methodology and replace the DB index. Sources: ND-GAIN; Findex - The Global Findex Database 2021; Worldwide Governance Indicators; IMF staff calculations. Category: Adaptation Data series: IMF-Adapted ND-GAIN Index IMF-Adapted Readiness score Readiness score, Governance Readiness score, IMF-Adapted Economic Readiness score, Social Vulnerability score Vulnerability score, Capacity Vulnerability score, Ecosystems Vulnerability score, Exposure Vulnerability score, Food Vulnerability score, Habitat Vulnerability score, Heath Vulnerability score, Sensitivity Vulnerability score, Water Vulnerability score, Infrastructure Metadata: The IMF-adapted ND-GAIN Country Index uses 75 data sources to form 45 core indicators that reflect the vulnerability and readiness of 192 countries from 2015 to 2021. As the original indicator, a country's IMF-adapted ND-GAIN score is composed of a Readiness score and a Vulnerability score. The Readiness score is measured using three sub-components – Economic, Governance and Social. In the original ND-GAIN database, the Economic score is built on the DB index, while in the IMF-adapted ND-GAIN, the DB Index is replaced with a composite index built using the arithmetic mean of “Borrowed from a financial institution (% age 15+)” from The Global Financial Index database (FINDEX_BFI) and “Government effectiveness” from the Worldwide Governance Indicators database (WGI_GE). The Vulnerability, Social and Governance scores do not contain any DB inputs and, hence, have been sourced from the original ND-GAIN database. Methodology: The procedure for data conversion to index is the same as the original ND-GAIN and follows three steps: Step 1. Select and collect data from the sources (called “raw” data), or compute indicators from underlying data. Some data errors (i.e., tabulation errors coming from the source) are identified and corrected at this stage. If some form of transformation is needed (e.g., expressing the measure in appropriate units, log transformation to better represent the real sensitivity of the measure etc.) it happens also at this stage. Step 2. At times some years of data could be missing for one or more countries; sometimes, all years of data are missing for a country. In the first instance, linear interpolation is adopted to make up for the missing data. In the second instance, the indicator is labeled as "missing" for that country, which means the indicator will not be considered in the averaging process. Step 3. This step can be carried out after of before Step 2 above. Select baseline minimum and maximum values for the raw data. These encompass all or most of the observed range of values across countries, but in some cases the distribution of the observed raw data is highly skewed. In this case, ND-GAIN selects the 90-percentile value if the distribution is right skewed, or 10-percentile value if the distribution is left skewed, as the baseline maximum or minimum. Based on this procedure, the IMF–Adapted ND-GAIN Index is derived as follows: i. Replace the original Economic score with a composite index based on the average of WGI_GE and cubic root of FINDEX_BFI1, as follows: IMF-Adapted Economic = ½ · (WGI_GE) + ½ · (FINDEX_BFI)1/3 (1) The IMF-adapted Readiness and overall IMF-adapted ND-GAIN scores are then derived as: IMF-Adapted ND-GAIN Readiness = 1/3 · ( IMF-Adapted Economic + Governance + Social) IMF-Adapted ND-GAIN = ½·( IMF-Adapted ND-GAIN Readiness+ND-GAIN Vulnerability) ii. In case of missing data for one of the indicators in (1), IMF-Adapted ND-GAIN Economic would be based on the value of the available indicator. In case none of the two indicators is available, the IMF-Adapted Economic score would not be produced but the IMF-Adapted ND-GAIN Readiness would be computed as average of the Governance and Social scores. This approach, that replicates the approach used to derive the original ND-GAIN indexes in case of missing data, ensures that the proposed indicator has the same coverage as the original ND-GAIN database. 1 Given that the FINDEX_BFI data are positively skewed, a cubic root transformation has been implemented to induce symmetry.