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Comparing Nicaraguan Central Bank Stats: Accuracy of Real GDP Growth Rates, Papers of Economics

This paper evaluates the reported economic growth of nicaragua as published by the central bank of nicaragua (bcn) by comparing it with calculated real gdp growth rates using the same data from the bcn. The method involves finding the rate of growth of real gdp by subtracting the rate of inflation from the rate of nominal gdp. The analysis reveals significant discrepancies between reported and calculated real gdp growth rates during the sandinista rule (1981-1986), with the reported growth rate being much lower than the calculated one. The document raises questions about the accuracy of bcn publications during this period and suggests the possibility of false reporting or hidden truths.

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Uploaded on 08/03/2009

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ABSTRACT
Nicaraguan Central Bank Statistics: Lies or …Hidden Truths?
This paper is a simple evaluation of the reported economic growth of Nicaragua, as
published by the Central Bank of Nicaragua, known as the BCN in Spanish.
The method used is very simple: for selected periods between 1960 and 1999, the
reported rate of growth of real GDP is compared with the rate of growth of a “calculated”
real GDP, using the same data from the BCN. The “other” or “calculated” real GDP is
simply found by using a basic formula: the rate of growth of real GDP is equal to the rate
of growth of nominal GDP minus the rate of growth of inflation.
Since the BCN publishes data on the three variables: real GDP, nominal GDP and the
Consumer Price Index (known as IPC in Spanish), the task was simple but the results
obtained were very interesting. As predicted by economic theory, almost every period
analyzed showed that the real GDP growth reported by the BCN was almost identical to
the real GDP growth calculated with our simple formula. However, one specific period
did not have such consistency: the 1981-1986 years when the Sandinista party was ruling
the country.
The reported BCN average annual growth rate of real GDP for that period was 0.36%.
The Nicaraguan economy experienced a very deep recession produced by a civil war, an
intrusive government that imposed a variety of price controls and subsidies, limitations
on freedom of speech, massive migration, and a sharp decline in investment. The
unemployment rate reached levels of at least 50% and the inflation rate triple digits.
Even though an average growth rate of 0.36% is very low, it doesn’t seem to reflect a
deeply troubled economy. However, the calculated average annual rate of growth of real
GDP turns out to be -18 percent, for an abysmal difference of 18.36% between the two.
All other periods used in this analysis: 1960-1963, 1964-1973, 1974-1977, 1989-1990,
1991-1994, 1995-1999, had differences no greater than 1 percent.
My conclusion is that the BCN publications of the 1980s, at least, cannot be trusted. On
the other hand, there is also the possibility that the BCN published “cooked” numbers for
the real GDP to hide the devastating economic problems of those years. This paper only
attempts to shed a light on the obvious issue: whether the BCN numbers (for one specific
period), are plagued with errors, false information, or hidden truths.

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ABSTRACT

Nicaraguan Central Bank Statistics: Lies or …Hidden Truths? This paper is a simple evaluation of the reported economic growth of Nicaragua, as published by the Central Bank of Nicaragua, known as the BCN in Spanish. The method used is very simple: for selected periods between 1960 and 1999, the reported rate of growth of real GDP is compared with the rate of growth of a “calculated” real GDP, using the same data from the BCN. The “other” or “calculated” real GDP is simply found by using a basic formula: the rate of growth of real GDP is equal to the rate of growth of nominal GDP minus the rate of growth of inflation. Since the BCN publishes data on the three variables: real GDP, nominal GDP and the Consumer Price Index (known as IPC in Spanish), the task was simple but the results obtained were very interesting. As predicted by economic theory, almost every period analyzed showed that the real GDP growth reported by the BCN was almost identical to the real GDP growth calculated with our simple formula. However, one specific period did not have such consistency: the 1981-1986 years when the Sandinista party was ruling the country. The reported BCN average annual growth rate of real GDP for that period was 0.36%. The Nicaraguan economy experienced a very deep recession produced by a civil war, an intrusive government that imposed a variety of price controls and subsidies, limitations on freedom of speech, massive migration, and a sharp decline in investment. The unemployment rate reached levels of at least 50% and the inflation rate triple digits. Even though an average growth rate of 0.36% is very low, it doesn’t seem to reflect a deeply troubled economy. However, the calculated average annual rate of growth of real GDP turns out to be -18 percent, for an abysmal difference of 18.36% between the two. All other periods used in this analysis: 1960-1963, 1964-1973, 1974-1977, 1989-1990, 1991-1994, 1995-1999, had differences no greater than 1 percent. My conclusion is that the BCN publications of the 1980s, at least, cannot be trusted. On the other hand, there is also the possibility that the BCN published “cooked” numbers for the real GDP to hide the devastating economic problems of those years. This paper only attempts to shed a light on the obvious issue: whether the BCN numbers (for one specific period), are plagued with errors, false information, or hidden truths.