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

Jannick Damgaard, Thomas Elkjaer and Niels Johannesen
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Jannick Damgaard: Danmarks Nationalbank
Thomas Elkjaer: International Monetary Fund

No 20-02, CEBI working paper series from University of Copenhagen. Department of Economics. The Center for Economic Behavior and Inequality (CEBI)

Abstract: Macro statistics on foreign direct investment (FDI) are blurred by offshore financial centers with enormous inward and outward investment positions. This paper uses 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 FDI into corporate shells with no substance and no real links to the local economy accounts for around 40 percent of global FDI. Ignoring Phantom FDI and allocating Real FDI to ultimate investors increases the explanatory power of standard gravity variables by around 25 percent.

Keywords: Global FDI Network; Special Purpose Entities; Phantom FDI; Real FDI (search for similar items in EconPapers)
JEL-codes: F21 F23 F30 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2020-01-20
New Economics Papers: this item is included in nep-int
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https://www.econ.ku.dk/cebi/publikationer/working-papers/CEBI_WP-02-20.pdf (application/pdf)

Related works:
Working Paper: What Is Real and What Is Not in the Global FDI Network? (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:kud:kucebi:2002

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