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Tadeusz Galeza and Mr. James A Chan

there. Given the pass-through nature of these investments, the usual costs and benefits associated with direct investment, other than collection of fees and taxes, do not apply. Foreign direct investors may, as their critics claim, buy out domestic assets, pushing local firms out of business or imposing their policies on governments. But the overall benefits to both host and investing economies from foreign direct investment significantly outweigh the costs. Capital inflows from foreign direct investors help finance a country’s spending—on investment, for example

Venkat Josyula

. 1.6 As a result of the problems cited above, the IMF organized the first internationally coordinated portfolio investment survey, using a common set of definitions and a common reference date. It was conducted as of the end of December 1997 (the 1997 CPIS). All major investing economies were invited to participate in the 1997 CPIS, and 29 economies 3 took part. The results were published by the IMF in December 1999. 4 Following the publication of the results of the 1997 CPIS, the IMF published an analysis 5 that explored these results in depth. 1.7 In 1999

International Monetary Fund

investments, the usual costs and benefits associated with direct investment, other than collection of fees and taxes, do not apply. Foreign direct investors may, as their critics claim, buy out domestic assets, pushing local firms out of business or imposing their policies on governments. But the overall benefits to both host and investing economies from foreign direct investment significantly outweigh the costs. Capital inflows from foreign direct investors help finance a country’s spending—on investment, for example—and increase tax revenue, create jobs, and produce

Jannick Damgaard, Thomas Elkjaer, and Niels Johannesen
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.
Jannick Damgaard, Thomas Elkjaer, and Niels Johannesen

economy to the surveys underlying the FDI statistics: the surveyed firms are asked to go through the chain of controlling owners until they identify a firm that is not controlled by any other firm. The economy of this ultimate owner is the ultimate investor economy. For this sample of economies, we simply adopt the self-reported statistics on FDI by ultimate investor economy. Second, for the remaining economies, we use corporation-level balance sheets and ownership links from the leading firm database Orbis to estimate conversion factors that translate Real FDI by

Jannick Damgaard and Thomas Elkjaer
This paper addresses three types of geographical decoupling in foreign direct investment (FDI), i.e., challenges when using traditional FDI data as a proxy for real economic integration between economies: (i) large bilateral asymmetries between inward and outward FDI, (ii) the role of special purpose entities (SPEs), and (iii) the effect of moving from immediate counterpart to ultimate investing economy (UIE). A unique global FDI network is estimated, where SPEs are removed and FDI positions are broken down by the UIE. Total inward FDI in the new network is reduced by one-third, and financial centers are less dominant.
Jannick Damgaard and Thomas Elkjaer

investments’ end destination. FDI has traditionally been broken down by the immediate counterpart economy, which provides a good measure for direct exposures, but lacks information about the ultimate investing economy (UIE). To close this data gap, OECD countries are now encouraged to also break down inward FDI by the UIE. The global geographical FDI network is very different according to the immediate counterpart economy compared to the UIE. Financial centers that typically host SPEs are much less important as ultimate FDI economies, reflecting the transitory nature of