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Title:Does Benford's law hold in economic research and forecasting? PDF Logo
Authors:Günnel, Stefan
Tödter, Karl-Heinz
Issue Date:2007
Series/Report no.:Discussion paper Series 1 / Volkswirtschaftliches Forschungszentrum der Deutschen Bundesbank 2007,32
Abstract:First and higher order digits in data sets of natural and socio-economic processes often follow a distribution called Benford's law. This phenomenon has been used in many business and scientific applications, especially in fraud detection for financial data. In this paper, we analyse whether Benford's law holds in economic research and forecasting. First, we examine the distribution of leading digits of regression coefficients and standard errors in research papers, published in Empirica and Applied Economics Letters. Second, we analyse forecasts of GDP growth and CPI inflation in Germany, published in Consensus Forecasts. There are two main findings: The relative frequencies of the first and second digits in economic research are broadly consistent with Benford's law. In sharp contrast, the second digits of Consensus Forecasts exhibit a massive excess of zeros and fives, raising doubts on their information content.
Subjects:Benford's Law
fraud detection
regression coefficients and standard errors
growth and inflation forecasts
JEL:C12
C52
C8
Document Type:Working Paper
Appears in Collections:Discussion Paper Series 1: Economic Studies, Deutsche Bundesbank

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