The iFOREX Blog has told you about a few unusual indices and economic theories before.

The Big Mac index was certainly one to remember,

and so was the Dollar Smile theory. Today though, we bring you a less amusing financial tool called “The Misery Index”. Seriously, we’re not making it up.

The misery index is, in fact, a well-known economic indicator. It was created by economist “Arthur Okun” and has since been adapted and developed. This index attempts to determine how average citizens are doing economically, AKA – how happy they are.

So, how do you calculate misery – or happiness for that matter?

In this case, you add the seasonally adjusted unemployment rate to the annual inflation rate. The reasoning behind this is quite simple: A worsening inflation and a higher rate of unemployment are likely to impact a country negatively, both financially and socially.

For example, high unemployment and inflation is likely to result in lower consumer expenditures, hence contributing to the country’s economic slow-down.

Pretty cool, right? Needless to say, this is only a theory, which may or may not serve as a useful tool for online traders. To learn more about how financial theories and indicators can help you manage your trading portfolio, visit the iFOREX Education Center.