Do countries falsify economic data strategically? Some evidence that they might.

Tomasz Michalski (1) , Gilles Stoltz (1, 2, 3)

1 GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC
2 DMA - Département de Mathématiques et Applications - ENS Paris
3 CLASSIC - Computational Learning, Aggregation, Supervised Statistical, Inference, and Classification

Using Benford's Law, we find evidence supporting the hypothesis that countries at times misreport their economic data strategically. We group countries with similar economic conditions and find that for countries with fixed exchange rate regimes, high negative net foreign asset positions, negative current account balances or more vulnerable to capital flow reversals we reject the first-digit law for the balance of payments data. This corroborates the intuition of a simple economic model. The main results do not seem to be driven by countries in Sub-Saharan Africa or those with low institutional quality ratings.

Keywords: capital flows; public information provision; misinformation; Benford's Law; transparency

Domains: Economics and Finance; Applications [stat.AP]

Tomasz Michalski, Gilles Stoltz. Do countries falsify economic data strategically? Some evidence that they might.. Review of Economics and Statistics, 2013, 95 (2), pp.591-616. ⟨10.1162/REST_a_00274⟩. ⟨halshs-00482106v3⟩