Using factor analysis to determine representative indicators in the financial sphere of economic security

Authors

DOI:

https://doi.org/10.20397/2177-6652/2022.v22i1.2342

Keywords:

economic security, representative indicators of economic security, factor analysis

Abstract

The purpose of the study is to adapt the factor analysis method for the determination of representative indicators. Within the article, the algorithm for applying factor analysis according to the goals of determining representative indicators is revealed. The authors use the method of factor analysis and the method of principal components, through which a sample of seven economic security indicators for the period from 2007 to 2020 is analyzed. The analysis is carried out using the IBM SPSS Statistics data analysis software platform. Based on the results of the analysis, a conclusion is made about the applicability of the factor model, the resulting factors are assessed, and an approach to the choice of a representative indicator based on factor loading is proposed. The main disadvantage of the proposed approach is subjectivity which consists in the choice of indicators for assessing economic security that form a particular area of economic security, determining the sufficiency of the number of factors, which accounts for the percentage of explained variance, and determining how many indicators are discarded based on the distribution of factor loading. Moreover, the analysis reveals the problem of mutual comparability of indicators for different periods, which prevents one from significantly increasing the sample. As a result of the study, the authors propose an approach to determining representative indicators based on the method of factor analysis. It is suggested to use the value of factor loading as the criterion for choosing a certain representative indicator. The authors also reveal how to consider the identified shortcomings of the proposed approach

References

Aivazyan, S. A., Bukhshtaber, V. M., Enyukov, I. S., Meshalkin, L. D. (1989). Applied statistics: classification and dimension reduction. Moscow: Finance and statistics.

Auerswald, M., & Moshagen, M. (2019). How to determine the number of factors to retain in exploratory factor analysis: A comparison of extraction methods under realistic conditions. Psychological Methods, 24(4), 468–491. https://doi.org/10.1037/met0000200

Broad money (% of GDP). (2021). The World Bank. Available at: https://data.worldbank.org/indicator/FM.LBL.BMNY.GD.ZS

Central government debt, total (% of GDP). (2021). The World Bank. Available at: https://data.worldbank.org/indicator/GC.DOD.TOTL.GD.ZS

Dvoeryadkina, N. N., Chalkina, N. A. (2011). Factor analysis in the study of data structure, Bulletin of the Amur State University. Series: Natural and Economic Sciences, 53, 1-5.

Fomina, E. E. (2017). Factor analysis and categorical method of the main components: comparative analysis and practical application for processing the results of the questionnaire. Humanitarian Bulletin, 10(60), 1-16.

Fuel exports (% of merchandise exports). (2021). The World Bank. Available at: https://data.worldbank.org/indicator/TX.VAL.FUEL.ZS.UN

High-technology exports (% of manufactured exports). (2021). The World Bank. Available at: https://data.worldbank.org/indicator/TX.VAL.TECH.MF.ZS?view=chart

ICT goods imports (% total goods imports). (2021). The World Bank. Available at: https://data.worldbank.org/indicator/TM.VAL.ICTG.ZS.UN

Inflation, consumer prices (annual %). (2021). The World Bank. Available at: https://data.worldbank.org/indicator/FP.CPI.TOTL.ZG

Kornilov, M.Ya., Yushin, I.V. (2019). Economic security: textbook. Moscow: RG-Press.

Krivorotov, V.V., Kalina, A.V., Eriashvili, N.D. (2015). Economic security of the state and regions: a textbook for university students studying in the direction of "Economics". Moscow: UNITI-DANA.

Larionov, I.K., Gureeva, M.A. (2019). Economic security of the individual, society and the state (multilevel, reproductive, global, systemic strategic approaches): a monograph. Moscow: Dashkov and K.

Samusevych, Y., Vysochyna, A., Vasylieva, T., Lyeonov, S., & Pokhylko, S. (2021). Environmental, energy and economic security: Assessment and interaction. In E3S Web of Conferences (Vol. 234). EDP Sciences. https://doi.org/10.1051/e3sconf/202123400012

Total reserves (includes gold, current US$). (2021). The World Bank. Available at: https://data.worldbank.org/indicator/FI.RES.TOTL.CD?view=chart

Ul Hadia, N., Abdullah, N., & Sentosa, I. (2016). An Easy Approach to Exploratory Factor Analysis: Marketing Perspective. Journal of Educational and Social Research. https://doi.org/10.5901/jesr.2016.v6n1p215

Watkins, M.W. (2018). Exploratory factor analysis: a guide to best practice. Journal of Black Psychology, 44(3), 219-246. https://doi.org/10.1177/0095798418771807

Yang, Sh., Florescu, I., Islam, Md.T. (2002). Principal component analysis and factor analysis for feature selection in credit rating. https://arxiv.org/abs/2011.09137v2

Yong, A. G., Pearce, S. (2013). A beginner’s guide to factor analysis: focusing on exploratory factor analysis. Tutorials in Quantitative Methods for Psychology, 9(2), 79-94. http://dx.doi.org/10.20982/tqmp.09.2.p079

Zeynivandnezhad, F., Rashed, F., Kanooni, A. (2019). Exploratory factor analysis for TPACK among mathematics teachers: why, what and how. Anatolian Journal of Education, 4(1), 59-76. https://doi.org/10.29333/aje.2019.416a

Downloads

Published

2022-03-27

How to Cite

Petrov, P. (2022). Using factor analysis to determine representative indicators in the financial sphere of economic security. Journal of Management & Technology, 22(1), 154–167. https://doi.org/10.20397/2177-6652/2022.v22i1.2342

Issue

Vol. 22 No. 1 (2022): Janeiro/Março

Section

ARTIGO

License

Copyright (c) 2022 Journal of Management & Technology

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.

Authors who publish with this journal agree to the following terms: • 1. The author(s) authorize the publication of the article in the journal. • 2. The author(s) ensure that the contribution is original and unpublished and is not being evaluated in other journal(s). • 3. The journal is not responsible for the opinions, ideas and concepts expressed in the texts because they are the sole responsibility of the author(s). • 4. The publishers reserve the right to make adjustments and textual adaptation to the norms of APA. • 5. Authors retain copyright and grant the journal right of first publication, with the work [SPECIFY PERIOD OF TIME] after publication simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal. • 6. Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal. • 7. Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Effect of Open Access) at http://opcit.eprints.org/oacitation-biblio.html