Redrawing the Map of Global Capital Flows: The Role of Cross-Border Financing and Tax Havens

56 Pages Posted: 23 Dec 2020

See all articles by Antonio Coppola

Antonio Coppola

Harvard University, Department of Economics

Matteo Maggiori

Harvard University; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Brent Neiman

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Jesse Schreger

Columbia University - Columbia Business School; National Bureau of Economic Research (NBER)

Multiple version iconThere are 4 versions of this paper

Date Written: December 18, 2020

Abstract

Global firms finance themselves through foreign subsidiaries, often shell companies in tax havens, which obscures their true economic location in official statistics. We associate the universe of traded securities issued by firms in tax havens with their issuer’s ultimate parent and restate bilateral investment positions to better reflect the financial linkages connecting countries around the world. Portfolio investment from developed countries to firms in large emerging markets is dramatically larger than previously thought. The national accounts of the United States, for example, understate the U.S. position in Chinese firms by nearly 600 billion dollars, while China’s official net creditor position to the rest of the world is overstated by about 50 percent. Further, we demonstrate how offshore issuance in tax havens affects our understanding of the currency composition of external portfolio liabilities and the nature of foreign direct investment. Finally, we provide additional restatements of bilateral investment positions, including one based the geographic distribution of sales.

Keywords: International Debt Issuance, FDI, China, Variable Interest Entities

JEL Classification: E01, E44, F21, F23, F32, F34, G11, G15, G32

Suggested Citation

Coppola, Antonio and Maggiori, Matteo and Neiman, Brent and Schreger, Jesse, Redrawing the Map of Global Capital Flows: The Role of Cross-Border Financing and Tax Havens (December 18, 2020). University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2020-118, Available at SSRN: https://ssrn.com/abstract=3751686 or http://dx.doi.org/10.2139/ssrn.3751686

Antonio Coppola

Harvard University, Department of Economics ( email )

Cambridge, MA 02138

Matteo Maggiori

Harvard University ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Brent Neiman (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

HOME PAGE: http://faculty.chicagobooth.edu/brent.neiman/index.html

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Jesse Schreger

Columbia University - Columbia Business School

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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