What Is Real and What Is Not in the Global FDI Network?
IMF Working Papers, December 2019
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Bibliographic details
- Authors: Jannick Damgaard, Thomas Elkjaer, Niels Johannesen
- Published: December 11, 2019
Overview
- Title: What Is Real and What Is Not in the Global FDI Network?
- Authors: Jannick Damgaard, Thomas Elkjaer, Niels Johannesen
- Publication type: Working Paper No. 19/274
- Date: December 11, 2019
- Core objective: Estimate the global FDI network while disentangling real investment and phantom investment and allocating real investment to ultimate investor economies.
Methods and data
- Uses several new data sources, both macro and micro, to estimate the global FDI network.
- Focus on identifying corporate shells with no substance and no real links to the local economy.
Key findings
- Phantom investment into corporate shells with no substance and no real links to the local economy may account for almost 40 percent of global FDI.
- Ignoring phantom investment and allocating real investment to ultimate investors increases the explanatory power of standard gravity variables by around 25 percent.
Implications for analysis and policy
- Macro FDI statistics are substantially distorted by offshore centers with enormous inward and outward investment positions.
- Reallocating FDI to ultimate investor economies and removing phantom investment improves the fit of empirical models (standard gravity specifications) substantially, implying better-informed policy and analysis when adjusted measures are used.
Source: IMF Working Paper No. 19/274 (authors: Jannick Damgaard, Thomas Elkjaer, Niels Johannesen), December 11, 2019.
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