Grey Zones in Global Finance: The Distorted Geography of Cross-Border Investments

43 Pages Posted: 20 May 2020

See all articles by Anne Laure Delatte

Anne Laure Delatte

Centre d'Etudes Prospectives et d'Info. Internationales (CEPII)

Amélie Guillin

Paris School of Economics (PSE); Johannes Kepler University Linz

Vincent Vicard

Centre d'Etudes Prospectives et d'Info. Internationales (CEPII)

Date Written: May 2020

Abstract

Tax avoidance schemes generate artificially complex cross-border financial structures inflating measured international investment stocks in tax havens. Using a standard gravity framework, we estimate that about 40\% of global assets (FDI, portfolio equity and debt) are 'abnormal' - unexplained - stocks. Abnormal stocks are increasing over time and concentrated in a limited number of jurisdictions. Six jurisdictions including three European countries are the largest contributors: Cayman, Bermuda, Luxembourg, Hong Kong, Ireland and the Netherlands. Interestingly, the Luxleaks in 2014 do not appear to have diverted cross-border investments away.

Keywords: Capital openness, Cross-border investments, Gravity Equation, tax havens

JEL Classification: F23, G21, H22, H32

Suggested Citation

Delatte, Anne Laure and Guillin, Amélie and Vicard, Vincent, Grey Zones in Global Finance: The Distorted Geography of Cross-Border Investments (May 2020). CEPR Discussion Paper No. DP14756, Available at SSRN: https://ssrn.com/abstract=3603988

Anne Laure Delatte (Contact Author)

Centre d'Etudes Prospectives et d'Info. Internationales (CEPII) ( email )

9 rue Georges Pitard
Paris Cedex 15, F-75015
France

Amélie Guillin

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

Johannes Kepler University Linz ( email )

Altenbergerstr. 69
A-4040 Linz, Uper Austria 4040
Austria

HOME PAGE: http://www.econ.jku.at/

Vincent Vicard

Centre d'Etudes Prospectives et d'Info. Internationales (CEPII) ( email )

20, avenur de Ségur
Paris Cedex 07, F-75334
France

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