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

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  • Gilles Stoltz

    ()
    (DMA - Département de Mathématiques et Applications - CNRS : UMR8553 - Ecole Normale Supérieure de Paris - ENS Paris, GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - GROUPE HEC - CNRS : UMR2959, INRIA Paris - Rocquencourt - CLASSIC - Institut National de Recherche en Informatique et en Automatique - Ecole Normale Supérieure de Paris - ENS Paris)

  • Tomasz Michalski

    ()
    (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - GROUPE HEC - CNRS : UMR2959)

Abstract

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.

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Bibliographic Info

Paper provided by HAL in its series Working Papers with number halshs-00482106.

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Date of creation: 15 Jul 2011
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Handle: RePEc:hal:wpaper:halshs-00482106

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Related research

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

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References

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  1. Bahar Kaynar & Arno Berger & Theodore P. Hill & Ad Ridder, 2010. "Finite-State Markov Chains obey Benford's Law," Tinbergen Institute Discussion Papers 10-030/4, Tinbergen Institute.
  2. Sandleris, Guido, 2008. "Sovereign defaults: Information, investment and credit," Journal of International Economics, Elsevier, vol. 76(2), pages 267-275, December.
  3. Sbracia, Massimo & Zaghini, Andrea, 2001. "Expectations and information in second generation currency crises models," Economic Modelling, Elsevier, vol. 18(2), pages 203-222, April.
  4. Tomasz Michalski & Gilles Stoltz, 2013. "Do countries falsify economic data strategically? Some evidence that they might," Post-Print halshs-00482106, HAL.
  5. Nye John & Moul Charles, 2007. "The Political Economy of Numbers: On the Application of Benford's Law to International Macroeconomic Statistics," The B.E. Journal of Macroeconomics, De Gruyter, vol. 7(1), pages 1-14, July.
  6. Heinemann, Frank & Illing, Gerhard, 2002. "Speculative attacks: unique equilibrium and transparency," Journal of International Economics, Elsevier, vol. 58(2), pages 429-450, December.
  7. George-Marios Angeletos & Christian Hellwig & Alessandro Pavan, 2004. "Coordination and Policy Traps," Levine's Bibliography 122247000000000294, UCLA Department of Economics.
  8. Michalski, Tomasz & Stoltz, Gilles, 2010. "Do countries falsify economic date strategically? Some evidence that they do," Les Cahiers de Recherche 930, HEC Paris.
  9. Eduardo Ley, 1995. "On the Peculiar Distribution of the U.S. Stock Indeces' Digits," Finance 9503002, EconWPA.
  10. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "This Time Is Different: Eight Centuries of Financial Folly," Economics Books, Princeton University Press, edition 1, volume 1, number 8973.
  11. George-Marios Angeletos & Alessandro Pavan, 2007. "Efficient Use of Information and Social Value of Information," Econometrica, Econometric Society, vol. 75(4), pages 1103-1142, 07.
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Cited by:
  1. Tariq Ahmad Mir, 2012. "The leading digit distribution of the worldwide Illicit Financial Flows," Papers 1201.3432, arXiv.org, revised Nov 2012.

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