Government spending linked to currency value
Comparing DEC alternative conversion factor (LCU per US$) with General government final consumption expenditure (constant LCU), per unit of GDP across 169 countries, 2020–2025.
- Rank correlation
- +0.90
- Holding size constant
- +0.88
- Countries compared
- 169
- Period
- 2020–2025
What might link these
A possible link between these indicators could be the economic stability of a country, where a strong economy might lead to both a stable currency and higher government expenditure. However, a careful reader should be cautious about the potential influence of inflation rates, which could affect both indicators. Inflation could be a likely confounder here.
Why this is not proof of anything
This is a correlation across countries, not an experiment. It cannot show that either indicator causes the other, and both may simply follow a third thing. This correlation might mislead because it doesn't account for other economic factors like trade balances or external debt that could influence both government spending and currency value.
The second figure above repeats the measurement with national population and income held constant. It is the more conservative number: a relationship that largely disappears there was mostly telling you that larger, richer countries have more of most things.
How this was measured
Both indicators were ranked across every country reporting each, and the two rankings compared — ranks rather than raw values, because a handful of very large countries can otherwise manufacture a relationship on their own. The calculation is arithmetic over figures already published on this site; the commentary above is drafted from the two indicator names and the resulting coefficients.