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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, 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.
Mr. Eduardo Borensztein and Mr. Prakash Loungani

of the 10 Asian economies in our sample for year-end 2007. Each row shows the share of the holdings accounted for by the four major groups of economies that we have used thus far in this paper, viz., Industrialized, Asia, Latin America and Eastern Europe, and to a fifth group of Other countries, which are mostly emerging markets. Also shown, in the last column of the table, is the total year-end holding in millions of US dollars. Table 4. Equity Security Holdings: Summary Statistics Investment in Equity Securities from the Investor Economy to the

Mr. Eduardo Borensztein and Mr. Prakash Loungani
Jannick Damgaard, Thomas Elkjaer, and Niels Johannesen
Mr. Eduardo Borensztein and Mr. Prakash Loungani
The paper compares trends in financial integration within Asia with those in industrialized countries and other regional groups. Declines in cross-country dispersion in equity returns and interest rates suggest increased Asian integration, with the process interrupted by crises and global volatility. Cross-border equity and bond holdings have also increased, but Asian countries remain considerably more financially integrated with major countries outside the region than with those within the region. The paper also discusses whether potential benefits of regional financial integration, such as increased risk-sharing and stability of the investor base, have materialized.
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.