Pitfalls in the use of foreign direct investment statistics

Clare O'Mahony and Frank Barry

The World Economy, 2019, vol. 42, issue 10, 2835-2853

Abstract: Foreign direct investment (FDI) statistics are widely used to study the impact of international capital movements and multinational enterprise (MNE) activities. FDI intensity is also an important indicator of globalisation and economic integration. Datasets spanning long time periods and with broad country coverage have been employed in numerous studies to analyse various aspects of the determinants and consequences of FDI. Focusing on a relatively homogeneous group of six Western European EU countries, the present study finds major inconsistencies in the construction and coverage of these data both through time and across countries, leading to large discrepancies. Asymmetries will be far greater for broader groups of more economically and institutionally diverse countries. This study recommends extreme caution in drawing conclusions based on FDI data.

Date: 2019
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