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The Shaky Foundations of International Economic Statistics


Lukas Linsi

The premise of the FickleFormulas project has been that economic statistics are not objective and that the choice for particular measures has both political roots and political consequences. This subproject has analysed key figures in international exchange, especially foreign direct investment (FDI) and trade. Its primary goal has been to shed light on the institutions and procedures that lead to the adoption of statistical formulas underpinning balance of payments statistics. Thereby, we have worked to understand better the politics that underlie them, as well as the degree to which they matter. Commonly used figures stand on much shakier ground than might be apparent at first sight.

How large is Greece’s public debt?

Do we really know how big the US trade deficit with China is? While official figures for 2009 had indicated that it was US$ 189bn, a research paper from the Dallas Fed found that it amounted to less than US$ 130bn once the value added in each country was accounted for. How large is Greece’s public debt? While the official figure stood at US$ 318bn in February 2015, billionaire investor Paul Kazarian claimed it was less than a tenth of this figure if the accounting rules advocated by the International Public Sector Accounting Standards were applied instead of the framework used by the European Commission and the International Monetary Fund (IMF).

Why these differences?

Different ways of measuring cross-border flows of goods and capital can generate huge differences in our estimates. Our objective has not been to adjudicate which measurement is the ‘right’ one in technical terms – an elusive quest – but instead to investigate systematically the political dynamics that determine which measures (out of a number of plausible alternatives) end up being adopted as the most commonly used ones.

The IMF Balance of Payments Manual

The subproject has zeroed in on the most authoritative international rulebook in payment statistics: the IMF’s Balance of Payments Manuals (BPM). The rules outlined in the BPM are generally regarded as the benchmark defining international ‘best practice’ for the collection of international economic statistics and are directly implemented by a large number of national statistical agencies as well as international financial institutions.

The BPM is a hugely powerful document – and yet, hardly anyone has ever heard of it

The first part of the research has built a better understanding of the role and function of the IMF’s BPM in the global economy by examining consecutive editions' political history and institutional framework. Who writes the BPM? Why has this rulebook been comprehensively revised five times since its inception in 1948? What are the institutional mechanisms that determine which rule ends up being adopted? To what extent are these processes influenced by political power dynamics and social norms?

Do these differences matter?

The second part of the subproject has estimated the degree to which the adoption of alternative statistical formulas can matter in quantitative terms. It has compared the differences in reported in- and outflows of capital and goods between countries that adopt the rules from the BPM and others who use alternative formulas in a systematic manner. This exercise has allowed us to estimate better to which degree changes in statistical formulas can influence key estimates in international economic affairs. Our ultimate goal there has been to achieve a better understanding of the uncertainty surrounding official estimates of international economic statistics that is rooted in the adoption of specific statistical formulas over plausible alternatives.