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Wikipedia has 3 widely different estimates of Iran's GDP: 1.7 Trillion, 1 Trillion and a quarter Trillion.
All three come from well-known institutes (IMF, UN and WB) - so this doesn't seem to be hand-wavy.
(Source: https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal) )

My question is, why do these estimates vary so much specifically for Iran, and not for other nations including China, Russia? And what would be the most accurate estimate of Iran's GDP?

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  • $\begingroup$ I assume you read the note next to 1.7trillion? $\endgroup$
    – Alex
    Aug 31, 2022 at 22:14
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    $\begingroup$ UN applies the following: "Data in current prices in US Dollars are converted from data in current prices in national currency using annual period-average exchange rates." $\endgroup$
    – Alex
    Aug 31, 2022 at 22:28
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    $\begingroup$ The world Bank approach is the following: "where the official exchange rate does not reflect the rate effectively applied to actual foreign exchange transactions, an alternative conversion factor is used." $\endgroup$
    – Alex
    Aug 31, 2022 at 22:31
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    $\begingroup$ World Bank and UN were very similar in 2015 but since the official exchange rate and shadow exchange rate diverged so much, you end up with such large differences. $\endgroup$
    – Alex
    Aug 31, 2022 at 22:41
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    $\begingroup$ data.worldbank.org/indicator/… you can swap between official and alternative LCU vs USD. 42000 vs ~184000. Take this into account and the quarter trillion becomes ~ a trillion, in line with the UN measure again. IMF is a 2022 forecast based on official rates as well (as seen in the note next to the 1.7 and as such also inflated). $\endgroup$
    – Alex
    Aug 31, 2022 at 22:47

1 Answer 1

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I admit I am piggybaking off of @Alex but hopefully adding some clarity with the charts and data provided in the answer.

First, we need to get some data:

I combined this in a Julia DataFrame to obtain:

enter image description here

Plotting GDP from all 3 sources shows the following:

enter image description here

The IMF data is also more forward looking (includes forecasts, which were excluded here). The World Bank metadata offers some interesting insight:

... different countries use different definitions, methods, and standards. World Bank staff review the quality of national accounts data and sometimes make adjustments to improve consistency with international guidelines. Nevertheless, significant discrepancies remain between international standards and actual practice. Many statistical offices, especially those in developing countries, face severe limitations in the resources, time, training, and budgets required to produce reliable and comprehensive series of national accounts statistics.

You can find some more details in this answer. For example, the UK "quickly" added £10 billion to GDP by accounting for illegal drugs and prostitution. This is still nothing compared to Nigeria, which literally doubled its GDP over night.

Nonetheless, as already suggested, it is mainly the difference in FX rates that causes the results to be so different in this case:

enter image description here

We can convert the UN Figure to the shadow FX rate via this line

df[!, "UN Inofficial GDP"] =  df[!,"UN GDP"]./df[!,"inofficial"].*df[!,"official"]

Plotting UN and WB GDP data looks like this now (IMF is practically identical to UN so I omitted it):

enter image description here

With regards to which series is more accurate - WB would be a more sensible choice. The official rate is kept artificially high. The effect is similar to Real vs Nominal GDP. The actual value that matters is the productive capacity. With high inflation, prices rise, and even if real productivity declines, as long as prices rise more, nominal GDP increases. That is what you observe in the GDP values using the official exchange rates as well. It makes it look as if GDP almost doubled since 2017, when in fact productivity declined.

Last but not least, it is difficult to get accurate numbers in circumstances like these. There may even be a large amount of unreported informal economic activity with barter or goods being consumed within the household (e.g. agriculture). This would in turn underestimate GDP, but to be honest, I have no experience with developing countries national accounting, and as such, this is a purely speculative addition.

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    $\begingroup$ Thanks for the efforts to get data and generating the graphs! It does make things much clearer- of course as you said, due credit should be given to @Alex. $\endgroup$
    – whoisit
    Sep 8, 2022 at 21:38

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