Abstract
In both academic research and policymaking, public sector debt and debt-to-GDP ratios are relied on for a multitude of important economic, political and socioeconomic decisions, especially as public sector balance sheets expand to an unprecedented size in the midst of the 2019–2020 COVID pandemic. The reliance on available data from reputable sources often overlooks the question of whether the denominator in this ratio is accurately measured or how well the denominator is understood by the audience interpreting it. Building on past work in international financial statistics, and making use of a unique and newly created dataset on media reporting of public sector debt, the purpose of this article is to examine the quality, accuracy, interpretation and overall meaningfulness of public sector financial statistics. The main findings suggest that i) most of the world’s governments still do not seem to feel sufficient pressure to voluntarily provide comprehensive financial statistics based on well-defined modern methodological frameworks and ii) high profile financial statistics, which are reported, have become increasingly numerous and complicated, making it difficult for non-experts to know which is most appropriate in the context of their analysis.
Highlights
In July of 1990, William Easterly and Stanley Fischer published a short article in the World Bank Research Observer entitled ‘The Economics of the Government Budget Constraint’, which ended with a one-page appendix on ‘Problems of Measurement’ and began with the sentence:“International comparisons of fiscal data are plagued by the variations in methodology and the lack of comprehensive coverage of the public sector
The results suggest that public sector financial statistics still lack transparency and consistency in most countries, especially in the case of public corporations that make up very large proportions of the economy in many emerging and developing countries
If accurate financial statistics are important for economic analysis, attracting capital, reducing risk premiums, accessing capital markets and preventing capital flight, why do problems with data quality continue to exist? Herrera and Kapur (2007) attempt to answer this question by focusing on two political factors, the incentives and capabilities of data actors
Summary
In July of 1990, William Easterly and Stanley Fischer published a short article in the World Bank Research Observer entitled ‘The Economics of the Government Budget Constraint’, which ended with a one-page appendix on ‘Problems of Measurement’ and began with the sentence:“International comparisons of fiscal data are plagued by the variations in methodology and the lack of comprehensive coverage of the public sector. Less than 1 year later, in 1991, Mario Blejer and Adrienne Cheasty published a fairly extensive review of analytical and methodological approaches to measuring fiscal deficits, ranging from accounting principles covered in national accounts methodology to (2020) 6:37 their economic interpretation and meaning (Blejer and Cheasty 1991, see Kotlikoff 1988). It seemed, in the early 1990s, that mainstream economics was beginning to take measurement issues in public sector financial data more seriously. For countries that are prolific financial statistics reporters, these have taken on a variant of ‘Goodhart’s Law’,1 where indicators that become important benchmarks adapt a wide variety of definitions to dilute or confuse the meaning of any single number or definition
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