What Is Real and What Is Not in the Global FDI Network?

By Jannick Damgaard, Thomas Elkjaer, Niels Johannesen

December 11, 2019

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Format: Chicago

Jannick Damgaard, Thomas Elkjaer, and Niels Johannesen. What Is Real and What Is Not in the Global FDI Network?, (USA: International Monetary Fund, 2019) accessed September 18, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Macro statistics on foreign direct investment (FDI) are blurred by offshore centers with enormous inward and outward investment positions. This paper uses several new data sources, both macro and micro, to estimate the global FDI network while disentangling real investment and phantom investment and allocating real investment to ultimate investor economies. We find that 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.

Subject: Asset and liability management, Balance of payments, Business enterprises, Economic sectors, Financial services, Foreign direct investment, Offshore financial centers, Revenue administration, Special purpose vehicle, Tax avoidance

Keywords: Business enterprises, Conversion factor, FDI network, FDI position, FDI statistics, Foreign direct investment, Global, Global FDI Network, Investor economy, Inward FDI, Offshore financial centers, Phantom FDI, Real FDI, Special Purpose Entities, Special purpose vehicle, Tax avoidance, Total FDI, WP

Publication Details

Pages:

54
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2019/274
Stock No:

WPIEA2019274
ISBN:

9781513521527
ISSN:

1018-5941

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