What Is Real and What Is Not in the Global FDI Network?
December 11, 2019
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Summary
<p>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.</p>
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.</p>
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Working Paper No. 19/274
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