Wednesday, 30 March 2016

Lies, Damned Lies, and FDI Statistics

The term “Lies, Damned Lies, and Statistics” was popularized by the great US author Mark Twain, who attributed it to the British Prime Minister Benjamin Disraeli. Weak arguments are bolstered by the use of statistics, to the point that the credibility of quantitative economics is often seen to be undermined by datamining.

It would seem that there is an even stronger form: Lies, Damned Lies, and FDI Statistics.

In recent work for the forthcoming African Economic Outlook 2016, my colleagues Birte Pfeiffer, Robert Kappel and I found that the statement applies to FDI inflows to Africa in particular. There are two main official sources for numbers on recent FDI flows: the IMF World Economic Outlook database, and the UNCTAD Global Investment Trends Monitor. Consider the differences provided by these prominent sources:

FDI inflows (USD billion) to Africa
Source
2014
2015
IMF_WEO
28.2
51.5
UNCTAD
55.0
38.0
Difference
                   - 26.8
                   + 23.5

The lower UNCTAD estimate for investment in Africa in 2015 reflects a sharp drop into Mozambique (-21%), Nigeria (-27%), and South Africa (-74%). FDI inflows form an important part of the roughly USD 200 billion financial flows (including remittances, the most important inflow ahead of ODA) to Africa. The reported differences are so striking that, according to the FDI source chosen, total net financial flows in 2015 to Africa rose by 5.9% (IMF-based), that total inflows dropped by 12.8% (UNCTAD-based) or that inflows dropped by 7.4% if erratic FDI data are ignored altogether.

Choose the Africa narrative you like, the poor quality of FDI data is a convenient element for your more or less fairy tales…

2 comments:

  1. I really like your blog. I really appreciate the good quality content you are posting here for free. May I ask which blog platform you are using?

    melt flow index manufacturers

    ReplyDelete
  2. This was a useful post and I think it's fairly easy to see in the other reviews, so this post is well written and useful. Keep up the good work.
    melt flow index manufacturers

    ReplyDelete