Measuring Multinational Production with Foreign Direct Investment Statistics: Recent Trends, Challenges, and Developments
IMF Working Papers, June 2, 2023
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- Measuring Multinational Production with Foreign Direct Investment Statistics: Recent Trends, Challenges, and Developments
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Bibliographic details
- Authors: Bruno Casella, Maria Borga, Konstantin Wacker
- Published: June 2, 2023
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400243530.001
Summary
- Foreign Direct Investment (FDI) statistics capture financing aspects of multinational enterprises (MNEs) and have been widely used as a proxy for multinational production because of their wide availability and cross-country comparability.
- Concerns exist that multinational production occurs in different countries than where financial positions are recorded, calling the practice of using FDI as a proxy into question.
- The paper revisits main objections to using FDI as a proxy for multinational production, explores counterarguments, and provides guidance on using FDI statistics to measure multinational production.
Key themes and analysis
- The complexity of the global production landscape increases the need for reliable measures of economic activity by MNEs.
- FDI statistics are frequently used as proxies for production activity due to availability and comparability across countries.
- Primary objection: geographic mismatch between recorded financial positions and actual locations of production.
- The paper examines counterarguments to these objections and assesses circumstances under which FDI statistics remain informative about multinational production.
Guidance and implications
- The paper offers guidance on the use of FDI statistics to measure multinational production, emphasizing careful interpretation given potential mismatches between financial recording locations and production locations.
- The guidance addresses the role of conduit FDI, special purpose vehicles, offshore financial centers, and the interpretation of FDI stocks in relation to foreign affiliates and multinational enterprises.
Subjects and keywords
- Subjects: Asset and liability management, Balance of payments, Financial institutions, Financial services, Foreign direct investment, Offshore financial centers, Special purpose vehicle, Stocks
- Keywords: conduit FDI, FDI, FDI data, FDI statistics, FDI stock, foreign affiliates, Foreign direct investment, Global, multinational enterprises, multinational production, Offshore financial centers, Special purpose vehicle, Stocks
Source: Measuring Multinational Production with Foreign Direct Investment Statistics: Recent Trends, Challenges, and Developments (IMF Working Paper No. 2023/113, June 2, 2023).
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