Tyranny of numbers

Reporting of economic data in Iran: an old rivalry resurfaces

Posted in General, Inflation, Unemployment by Djavad on June 16, 2015

It is a good sign that people in Iran are paying increasing attention to the accuracy of government data.  Before this they used to dismiss all data, especially inflation, as propaganda (see my previous posts on inflation here and here).  The fact that an announcement about which government agency is authorized to release economic statistics became news last week is a sign that more people take such data seriously, as they should.

 On June 9, 2015, a brief but broad ruling (link in Persian) from the High Council of Statistics reiterated an old law that assigns the role of the sole reporter of economic statistics to the Statistical Center of Iran (SCI).  SCI publishes a vast array of data, including the rate of inflation, which is the most closely watched economic indicator in Iran, and is also produced by SCI’s rival, the Central Bank of the Islamic Republic of Iran (CBI for short).  Three days later,  the CBI the governor, Valiollah Seif, denied that his agency was about to cease collecting or publishing its own data.

If there was a recent case of disagreement between the two agencies that prompted the Council’s new ruling, I missed it.  But in any case more than turf may be involved in the institutional rivalry.  The Council is chaired by the head of the newly revived Management and Planning organization (MPO), Mr. Nobakht, who happens to be SCI director’s boss.  CBI governor, on the other hand, is appointed by the Minister of Economy.  Limiting the source of information to SCI gives Mr. Nobakht, who is also the Vice President and the government spokesman, more control over what and when can be announced.  This small institutional detail may also explain why the CBI governor was able to shrug off the ruling easily.

Two of the many economic indicators that SCI publishes, on inflation and unemployment, are closely watched by the public and are therefore politically consequential.  But, at least for inflation, the two agencies have been telling the same story, so there is no reason — other than saving on costs — to restrict their production to one agency only.  As the graphs below show, the Consumer Price Index series for urban areas published by SCI and CBI show remarkable similarity.  The graph on the left shows the urban CPI series from both institutions, which follow each other rather closely, although CBI shows faster inflation since 1390.  If you are interested in how inflation is reported each month, in some months the two indexes can differ (see graph on right).  For example, a year ago, in July 2014, SCI had the rate of inflation going up while CBI had it coming down.  But most of the time there is no discernible difference

CPI_CBIvsSCI  Inlfation_CBIvsSCI

If I had to choose one, and I see no reason why one should have to, I would pick SCI’s inflation series because SCI reports both a rural and an urban index and, more importantly, because it collects (and makes public!) a comprehensive consumer budget survey — since 1963 — that provides the weights for the CPI.  (CBI also collects a consumer survey for its urban CPI, which it keeps to itself, so we don’t know how good it is.)

The similarity of the two inflation indices is not really surprising because there is little one can do to manipulate the rate of inflation in the long run.  People make their own independent observations (though on very limited baskets), and the CPI in one period depends on its level in the previous period, so a lie is caught sooner or later.  Fudging a trended time series is not very smart.

The same is not true of the unemployment rate, which people cannot quite observe on their own and without a national survey, and which is not cumulative or trended and can therefore be misrepresented for a while without the misrepresentation being revealed by later observations.  It happens that unemployment is reported solely by the SCI.  The Ministry of Labor sometimes makes its own assessments of unemployment, which do cause a stir, but they are not based on national surveys, so it is good that they should stay out of it.

I have noticed that the SCI unemployment report that used to come out a month or two after each quarter has not been published recently.  The last published report was for fall of 1393 (2014).  Perhaps there is extra sensitivity to such data while the negotiations in Switzerland are ongoing. If that is the case, we should be hopeful that a successful conclusion to these negotiations would cause more than the release of Iran’s frozen funds.

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One Response

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  1. Bahman ghara said, on July 25, 2015 at 2:00 pm

    Excellent statistical analysis,very informative .
    We were classmates in middle school.
    He was the smartest high school graduate of Iran .


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