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

55 Pages Posted: 22 Jan 2020

See all articles by Jannick Damgaard

Jannick Damgaard

Danmarks Nationalbank (The Central Bank of Denmark)

Thomas Elkjaer

International Monetary Fund (IMF)

Niels Johannesen

University of Copenhagen

Multiple version iconThere are 2 versions of this paper

Date Written: December 2019

Abstract

Macro statistics on foreign direct investment (FDI) are blurred by offshore centers withenormous inward and outward investment positions. This paper uses several new datasources, both macro and micro, to estimate the global FDI network while disentangling realinvestment and phantom investment and allocating real investment to ultimate investoreconomies. We find that phantom investment into corporate shells with no substance and noreal links to the local economy may account for almost 40 percent of global FDI. Ignoringphantom investment and allocating real investment to ultimate investors increases theexplanatory power of standard gravity variables by around 25 percent.

Keywords: Development, Offshore financial centers, Foreign investment, Economic integration, Economic growth, Global FDI Network, Special Purpose Entities, Phantom FDI, Real FDI., WP, FDI, total FDI, SPEs, ultimate owner, Orbis

JEL Classification: F21, F23, F30, E01, G21, F2, O4, K34

Suggested Citation

Damgaard, Jannick and Elkjaer, Thomas and Johannesen, Niels, What is Real and What is Not in the Global FDI Network? (December 2019). IMF Working Paper No. 19/274. Available at SSRN: https://ssrn.com/abstract=3523147

Jannick Damgaard (Contact Author)

Danmarks Nationalbank (The Central Bank of Denmark) ( email )

Havnegade 5
Copenhagen, 1093
Denmark

Thomas Elkjaer

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Niels Johannesen

University of Copenhagen ( email )

Nørregade 10
Copenhagen, København DK-1165
Denmark

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