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Mr. Jesus R Gonzalez-Garcia and Mr. Gonzalo C Pastor Campos
This paper examines the usefulness of testing the conformity of macroeconomic data with Benford's law as indicator of data quality. Most of the macroeconomic data series tested conform with Benford's law. However, questions emerge on the reliability of such tests as indicators of data quality once conformity with Benford's law is contrasted with the data quality ratings included in the data module of the Reports on the Observance of Standards and Codes (data ROSCs). Furthermore, the analysis shows that rejection of Benford's law may be unrelated to the quality of statistics, and instead may result from marked structural shifts in the data series. Hence, nonconformity with Benford's law should not be interpreted as a reliable indication of poor quality in macroeconomic data.
Mr. Jesus R Gonzalez-Garcia and Mr. Gonzalo C Pastor Campos

of July 2008, data ROSCs (and updates) containing data quality ratings have been published for some 80 IMF member countries. 1 2 This paper examines the usefulness of Benford’s law to ascertain overall data quality. To this end, it revisits and expands the work by Nye and Moul (2007) who tested certain data for conformity with Benford’s law, focusing on the gross domestic product (GDP) series for members of the Organization for Economic Cooperation and Development (OECD) and African countries. Benford’s law, also called the first digit law, refers to an

Mr. Jesus R Gonzalez-Garcia and Mr. Gonzalo C Pastor Campos

Front Matter Page Statistics Department Authorized for distribution by J.R. Rosales Contents I. Introduction II. Benford’s Law and Testing Methodology A. Benford’s Law B. Testing Methodology III. Conformity of Macroeconomic Data with Benford’s Law IV. Comparison of Goodness of Fit Tests Results with ROSC Assessments of Data Quality V. Can Tests of Conformity with Benford’s Law be Considered Reliable Indicators of Macroeconomic Data Quality ? VI. Conclusion Appendix: Country Groups and Data Series Used References Text Tables

International Monetary Fund. Research Dept.

Policy in Singapore Eskesen, Leif Lybecker No. 09/9 Distress in European Banks: An Analysis Based on a New Dataset Poghosyan, Tigran; Cihák, Martin No. 09/10 Benford’s Law and Macroeconomic Data Quality Gonzalez-Garcia, Jesus; Pastor, Gonzalo C. No. 09/11 How Can Burundi Raise Its Growth Rate? The Impact of Civil Conflicts and State Intervention on Burundi’s Growth Performance Basdevant, Olivier No. 09/12 The International Diversification Puzzle When Goods Prices Are Sticky: It’s Really about Exchange-Rate Hedging

Mr. Timothy C Irwin
Although the budget deficit and the public debt feature prominently in political debate and economic research, there is no agreement about how they should be measured. They can be defined for different sets of public institutions, including the nested sets corresponding to central government, general government, and the public sector, and, for any definition of government, there are many measures of the debt and deficit, including those generated by four kinds of accounts (cash, financial, full accrual, and comprehensive), which can be derived from four nested sets of assets and liabilities. Each debt and deficit measure says something about public finances, but none tells the whole story. Each is also vulnerable to manipulation, and is likely to be manipulated if it is subject to a binding fiscal rule or target. Narrow definitions of government encourage the shifting of spending to entities outside the defined perimeter of government. Narrow definitions of debt and deficit encourage operations involving off-balance-sheets assets and liabilities, while broad measures are susceptible to the mismeasurement of on-balance-sheet assets and liabilities. Reviewing the literature on these issues, the paper concludes that governments should publish several measures of the debt and deficit in a form that clearly reveals their interrelationships.
International Monetary Fund. Research Dept.
IMF research summaries on measures of financial integration (by Martin Schindler) and on sovereign wealth funds and financial stability (by Tao Sun and Heiko Hesse); regional study on cross-border labor flows in new European Union member states (by Rudolfs Bems); listing of contents of Vol. 56 No. 1 of IMF Staff Papers, a special issue on frontiers of research on financial globalization; a listing of visiting scholars at the IMF during December 2008–March 2009; and a listing of recent IMF Working Papers.
Mr. Timothy C Irwin

reported deficit but did not improve public finances in a broader sense. In three countries, the dubious transactions they identify (they do not attempt to specify which involve off-balance-sheet assets and liabilities) averaged more than half a percent of GDP. The transactions were more likely to occur when the deficit rule was in danger of being breached. There is also some suggestive evidence of a different kind of problem. Auditors looking for made-up numbers in company accounts assess the extent to which the numbers in the accounts deviate from Benford’s law