Globalization and the Growing Defects of International Economic Statistics

Official international economic statistics are generally considered accurate and meaningful gauges of cross-border flows of trade and capital. Most data users also assume that the quality of the underlying data keeps improving over time. Through an extensive review of the national accounting literature, archival research, two dozen interviews with high-level statisticians, and a series of data quality tests, we evaluate this common view for the primary source of data on trade and capital flows: the International Monetary Fund’s Balance of Payments Statistics. Our assessment paints a less rosy picture: reported figures are far less accurate than they are typically imagined to be and often do not correspond to the theoretical concepts with which users associate them. At the same time, measurement quality deteriorates over time, with potentially serious implications for empirical research using this data. Our analysis identifies the principal reasons for these worrying trends and concludes with a first set of suggestions on how to address them in our research designs.