(SPEs), or intangibles, e.g., intellectual property rights that are easily moved between economies in an increasingly digitalized global environment. This paper analyzes the three main ways that FDI measures are geographically decoupled and then estimates the first global FDI network to address them. First, there are bilateral asymmetries between FDI positions for most economy pairs in the published numbers: one economy’s outward FDI does not match the counterpart economy’s inward FDI from that economy. For instance, in the IMF’s Coordinated Direct Investment Survey
outsized role in the global FDI network: the Netherlands, Luxembourg, Hong Kong SAR, Switzerland, Singapore, Ireland, Bermuda, the British Virgin Islands and the Cayman Islands jointly host more than 40 percent of global FDI although their combined share of global GDP is only around 3 percent. Strikingly, these economies have tax systems that, in one way or another, are useful in the tax planning of multinational firms (e.g. Hines, 2010 ; Zucman, 2014 ). Tax planning is therefore a plausible explanation for the otherwise puzzling size of these FDI positions. Indeed
Front Matter Page Statistics Department Contents Abstract I. Introduction II. Bilateral Asymmetries in Official FDI Data III. The Role of Special Purpose Entities IV. FDI by Ultimate Investing Economy V. Constructing New Global FDI Estimates VI. Global FDI Networks VII. Conclusion VIII. References Tables 1. List of Low-Tax Economies Figures 1. Asymmetries in FDI between Economy Pairs 2. Top 20 Inward FDI Economies 3. Inward FDI Positions by Immediate and Ultimate Investing Economy 4. Round-Tripping 5. SPE
figures in tax havens. Prominent cases include Irish GDP growth of 26 percent in 2015, following some multinationals’ relocation of intellectual property rights to Ireland, and Luxembourg’s status as one of the world’s largest FDI hosts. To get better data on a globalized world, economic statistics also need to adapt. The new global FDI network is useful to identify which economies host phantom investments and their counterparts, and it gives a clearer understanding of globalization patterns. Such data offer greater insight to analysts and can guide policymakers in
Front Matter Page Statistics Department Front Matter Page What Is Real and What Is Not in the Global FDI Network? * Jannick Damgaard (Danmarks Nationalbank) Thomas Elkjaer (International Monetary Fund) Niels Johannesen (University of Copenhagen and CEBI) December 2, 2019 Contents 1 Introduction 2 Estimating the global FDI network 2.1 Data sources 2.2 Total FDI by economy of immediate investor 2.3 Decomposition: Real vs Phantom investment 2.4 Real FDI by economy of ultimate investor 2.5 Summary statistics 3