The leading digit distribution of the worldwide illicit financial flows

The leading digit distribution of the worldwide illicit financial flows The illicit financial flows (IFFs) exiting the developing countries are frequently discussed as hidden resources which could have been otherwise properly utilized for their development. Further, in the context of overhaul of the global financial system, necessitated by the current financial crisis, the IFFs have generated a lot of media and public interest which in turn has however also triggered a debate on the validity of these estimates. To look for completeness or rather for possible manipulation of financial data, forensic analysts routinely use a statistical tool called Benford’s law which states that in data sets from different phenomena leading digits tend to be distributed logarithmically such that the numbers beginning with smaller digits occur more often than those with larger ones. In order to gain some insight on their validity we investigate here the recent data on estimates of IFFs for conformity to Benford’s law. We find the patterns in the distribution of the leading digits in the IFFs data similar as predicted by Benford’s law and thereby establish that the frequency of occurrence of the leading digits in these estimates does closely follow the law. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Quality & Quantity Springer Journals

The leading digit distribution of the worldwide illicit financial flows

Quality & Quantity , Volume 50 (1) – Dec 12, 2014
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Publisher
Springer Netherlands
Copyright
Copyright © 2014 by Springer Science+Business Media Dordrecht
Subject
Social Sciences; Methodology of the Social Sciences; Social Sciences, general
ISSN
0033-5177
eISSN
1573-7845
D.O.I.
10.1007/s11135-014-0147-z
Publisher site
See Article on Publisher Site

Abstract

The illicit financial flows (IFFs) exiting the developing countries are frequently discussed as hidden resources which could have been otherwise properly utilized for their development. Further, in the context of overhaul of the global financial system, necessitated by the current financial crisis, the IFFs have generated a lot of media and public interest which in turn has however also triggered a debate on the validity of these estimates. To look for completeness or rather for possible manipulation of financial data, forensic analysts routinely use a statistical tool called Benford’s law which states that in data sets from different phenomena leading digits tend to be distributed logarithmically such that the numbers beginning with smaller digits occur more often than those with larger ones. In order to gain some insight on their validity we investigate here the recent data on estimates of IFFs for conformity to Benford’s law. We find the patterns in the distribution of the leading digits in the IFFs data similar as predicted by Benford’s law and thereby establish that the frequency of occurrence of the leading digits in these estimates does closely follow the law.

Journal

Quality & QuantitySpringer Journals

Published: Dec 12, 2014

References

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