IMF-用外国直接投资统计数据衡量跨国生产：近期趋势、挑战和发展

MeasuringMultinational

ProductionwithForeignDirect

InvestmentStatistics:

RecentTrends,Challenges,andDevelopments

BrunoCasella,MariaBorga,andKonstantinM.Wacker

WP/23/113

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2023

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WP/23/113

IMFWorkingPaper

StatisticsDepartment

MeasuringMultinationalProductionwithForeignDirectInvestmentStatistics:

RecentTrends,Challenges,andDevelopmentsPreparedbyBrunoCasella,MariaBorga,andKonstantinM.Wacker

AuthorizedfordistributionbyCarlosSánchez-Muñoz

June2023

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Abstract

Inacomplexglobalproductionlandscape,thequestformeasuresofeconomicactivitybymultinationalenterprises(MNEs)hasbecomemorepressing.ForeignDirectInvestment(FDI)statistics,whichcapturefinancingaspectsofMNEs,haveoftenbeenusedasaproxyformultinationalproductiongiventheirwideavailabilityandcross-countrycomparability,butconcernsthatmultinationalproductionoccursindifferentcountriesthanwherefinancialpositionsarerecordedcallthispracticeintoquestion.ThispaperrevisitsthemainobjectionstotheuseofFDIasaproxyformultinationalproduction,explorescounterarguments,andprovidesguidanceontheuseofFDIstatisticstomeasuremultinationalproduction.

JELClassificationNumbers:F20,F23,C82

Keywords:FDI;multinationalproduction;multinationalenterprises;foreignaffiliatesAuthor’sE-MailAddress:bruno.casella@;mborga@;k.m.wacker@rug.nl

MariaBorgaisDeputyDivisionChiefintheBalanceofPaymentsDivision,IMF;BrunoCasellaisSeniorEconomistattheDivisionofInvestmentandEnterprise,UNCTAD;KonstantinM.WackerisanassistantprofessorattheUniversityofGroningen,Netherlands.TheauthorsaregratefultoRichardBolwijn(UNCTAD),CarlosSánchez-Muñoz(IMF),JannickDamgaard(IMF),andThomasElkjaer(IMF)forhelpfulcomments.SubstantialstatisticalandresearchinputswereprovidedbyGregoryAuclaire(UNCTAD).

WORKINGPAPERS

MeasuringMultinationalProductionwithForeignDirect

InvestmentStatistics

RecentTrends,Challenges,andDevelopments

PreparedbyBrunoCasella,MariaBorga,andKonstantinM.Wacker

1

1MariaBorgaisDeputyDivisionChiefintheBalanceofPaymentsDivision,IMF;BrunoCasellaisSeniorEconomistattheDivisionofInvestmentandEnterprise,UNCTAD;KonstantinM.WackerisanassistantprofessorattheUniversityofGroningen,Netherlands.ThecorrespondingauthorisKonstantinWacker:

k.m.wacker@rug.nl

.TheauthorsaregratefultoRichardBolwijn(UNCTAD),CarlosSanchezMunoz(IMF),JannickDamgaard(IMF),andThomasElkjaer(IMF)forhelpfulcomments.SubstantialstatisticalandresearchinputswereprovidedbyGregoryAuclaire(UNCTAD).

IMFWORKINGPAPERSMeasuringMultinationalProductionwithForeignDirectInvestmentStatistics

Contents

Glossary

3

ExecutiveSummary

4

Introduction

5

I.HowtoUnmask“PhantomFDI”?

8

Critique1:“PhantomFDI”throughoffshorefinancialcentersisdrivenbyfinancialandtaxmotives,

weakeningtherelationshipbetweenFDIandmultinationalproduction

8

II.BilateralFDIStatistics:HowMuchofaPuzzle?

15

Critique2:Offshorefinancialcentersactasmiddlemenbetweeninvestors’countryoforiginandfinal

destination,makingultimateinvestorcountriesinvisibleinbilateralFDIstatistics

15

III.BeyondPhantomFDI:SourceofFundsvsUseofFunds

21

Critique3:FDIisaspecificsourceoffundsanddoesnotcapturelocalandnon-affiliatedsourcesof

financingofmultinationaloperations

21

IV.ImprovingFDIData:RecentProgressandDevelopments

24

V.ConclusionandGuidelinesforAppliedResearch

25

References

27

FIGURES

1.MainCritiquesoftheUseofFDIDatatoMeasureMultinationalProductionandRecentDevelopmentsand

Findings

8

2.AnIllustrativeSchemeofConduitFDI

10

3.RelationshipBetweenFDIInwardStockandInwardSalesofForeignAffiliates,OECDCountries,2016,

US$millions

14

4.Germany’sInwardFDIStockandFATSTurnoverbyPartner(Investor)Country,ShareinTotal,TopTen

LargestUltimateInvestorsinGermany,2016

16

5.ComparisonBetweenGermanyReportedPositionsbyUltimateInvestingEconomy(UIE),Reported

PositionsbyImmediateDirectInvestorandEstimatedPositionsbyUIE,ShareinTotal,TopTenLargestUIEs

inGermany,2016

17

6.RelationshipBetweenImmediateandUltimateFDIStocksinBilateralData

19

7.RelationshipBetweenFDIStockandOperationalData

23

TABLES

1.TheSizeofSPEs:ComparisonBetweenEstimatedandReportedandBetweenUNCTADandDEJ

Estimates,2016

13

2.GravityEstimationforImmediateandUltimateFDIDeterminants

20

Glossary

BEPS

BaseErosionandProfitShifting

BoP

BalanceofPayments

CDIS

CoordinatedDirectInvestmentSurvey

FA

ForeignAffiliate

FATS

ForeignAffiliateStatistics

FDI

ForeignDirectInvestment

GDP

GrossDomesticProduct

IIP

InternationalInvestmentPosition

MNE

MultinationalEnterprise

OECD

OrganizationforEconomicCooperationandDevelopment

OFC

OffshoreFinancialCenter

SPE

SpecialPurposeEntity

UNCTAD

UnitedNationsConferenceonTradeandDevelopment

UIE

UltimateInvestingEconomy

USBEA

UnitedStatesBureauofEconomicAnalysis

ExecutiveSummary

Giventheimportanceofmultinationalenterprises(MNEs)intheworldeconomy,itisimportantforpolicymakers,researchersandanalyststoproperlymeasuretheireconomicactivity.Itiscommontouseforeigndirectinvestment(FDI)statisticsforthispurposebecausetheyarewidelyavailableandcomparableacrosscountries.SinceFDIstatisticscapturethefinancingaspectsofMNEs,recentresearchhasquestionedthisuseofFDIstatisticsduetoconcernsthattheproductionofMNEshappensindifferenteconomiesthanwheretheyrecordfinancialpositions.

ThemostprominentcritiqueoftheuseofFDIstatisticshasbeenthatMNEscanchanneltheirinvestmentsthroughanenterpriseresidentinoneeconomytoanenterpriseinanothereconomy.ThechannellingofFDIthroughmultiplejurisdictions,alsocalledconduitFDI,happensforavarietyofreasons,includingaccesstosophisticatedtaxandfinancialservices,toprotectparentcompaniesagainstclaimsontheiraffiliates,andtoprotecttheirinvestmentsagainstpoliticalrisk.ThispracticeinflatesFDIstatisticsandobscurestheultimateinvestorsanddestinationsofFDI.WhileconduitFDIcanoccurinanyeconomy,itismostassociatedwithoffshorefinancialcenters(OFCs)inwhichtheOFCactsasintermediatejurisdictionbetweentheinvestors’economyoforiginandthefinaldestinationofFDI.Ithasbeenestimatedthatbetween30and40percentoftotalFDIstockisroutedthroughOFCs.

Thispaperhighlightstheprogressthatresearchersandtheinternationalstatisticalcommunityhavemadeinaddressingtheseconcerns.TheinternationalstatisticalcommunityhasdevelopedguidelinesandinitiatedcollectionofdataonSpecialPurposeEntities(SPEs),whichareentitiesthatareofteninvolvedinchannellingFDIthroughOFCs.IdentifyingtransactionsandpositionsofSPEsseparatelyfromotherdirectinvestmententerprisesenablestheidentificationofpureconduitactivities.IfFDIdatatoandfromSPEsarenotavailable,itispossibletorelyonalternativeanalyticalmethodstoestimatetheroleofSPEsinaggregateFDIstatistics,whichwediscussinthispaper.ThesemethodsbuildonthestatisticalcorrelationbetweengrossdomesticproductandFDIstocktoestimatethesizeofconduitFDI.ThestatisticalcommunityhasalsodevelopedguidanceontherecordingofFDIpositionsbytheultimateinvestingeconomy(UIE)tolookthroughtheconduiteconomiesandrevealtheultimateoriginofFDIinaneconomy.Wheresuchstatisticsarenotyetavailable,researchershavedevelopedanalyticalmethodstoaddressthegapbetweendirectandultimatebilateralstatisticsgeneratedbychannellingFDIthroughOFCs.Finally,itisimportanttorememberthatwhenthebilaterallinkinvolvesnon-OFCeconomies,standardbilateralFDIstatisticsalreadyidentifyultimateinvestorsrelativelywell.

ResearcherswhoregardFDIstatisticsasaproxyformultinationalproductionshouldconsiderthefollowingpracticalsteps:(1)ExplorethemetadatatounderstandthecoverageofFDIstatistics(e.g.,whetheritincludesSPEsornotandwhetherSPEsarereportedseparately);(2)TakeintoaccounttheinstitutionalsettingoftheeconomiesbeingstudiedtounderstandiffactorsthatcandistorttherelationshipbetweenFDIpositionsandmultinationalproductionarepresent;(3)AdjustforFDItoandfromSPEsbyusingpublisheddatacombinedwithoneoftheavailableanalyticalmethods;(4)IntheanalysisofbilateralFDIstatistics,identifyultimateinvestorsusingpublisheddatacombinedwithoneoftheavailableanalyticalmethodsdiscussed;and(5)CompareandcomplementFDIdatawithotherrelevantdatasources,includingproject-baseddata,firm-leveldata,survey-leveldata,andtradeandvalueaddedtradedatawhenavailable.Withcaretakenintheiruse,IIP-basedFDIstatisticsremainanimportantandinstrumentaldatasourcetostudyandunderstandmultinationalproduction.

IMFWORKINGPAPERSMeasuringMultinationalProductionwithForeignDirectInvestmentStatistics

Introduction

Foreigndirectinvestment(FDI)isakeycategoryofinternationalinvestment.AccordingtothemostrecentvintageofthedatasetofLaneandMilesi-Ferretti(2021),FDIstocksaccountedforsome30percentofglobalcross-borderliabilitiesin2015,andFDIaccountedforoverhalfofforeignfinancinginmorethanathirdofcountries,mostofthemdeveloping.Togetherwithstatisticsonportfolioinvestmentandothercross-borderinvestment(suchascross-borderbankloans),FDIpositionsreflectfinancialexposureandinternationalfinancialintegrationacrosscountries.

WhatdistinguishesFDIfromotherinternationalinvestmentistheideathattheFDIinvestorseeksalastinginterestinandasignificantdegreeofinfluenceoveranenterpriseinanothereconomy.

1

ThisdefinitionhashistoricallymotivatedtheuseofFDIdatafromtheBalanceofPaymentsasaproxyformultinationalenterprises’production,activitiesandpresenceinthehosteconomybecausetheforeignenterprisesreceivingFDI(directinvestmententerprises)arelargelyforeignsubsidiaries,branches,andassociatesofmultinationalgroups.Inthispaper,wereferto“multinationalproduction”asaconceptthatquantifiestherealactivityofMNE’saffiliates,suchasoutputorsales,inlinewiththeseminalacademicliterature(e.g.,Ramondoetal.,2015;Alviarez,2019;Arkolakisetal.,2018;MiroudotandRigo,2021).

However,therehavelongbeenconcernsabouttheadequacyofFDIstatisticstomeasurepatternsofmultinationalproductionthathaveincreasedinrecentyears(e.g.,Lipsey,2007;Beugelsdijketal.,2010;LeinoandAli-Yrkkö,2014;BlanchardandAcalin,2016;Sauvant,2017;LinsiandMugge,2019).Asdiscussedfurtherbelow,thesepapershavehighlightedthattheproductionactivitiesofMNEsmaynotoccurinthelocationswheretheyrecordtheirfinancialpositions,raisingquestionswhenFDIstatisticscanadequatelybeused.ThoseempiricalcontributionsweremostlybasedoncomparingFDIstatisticstodataontheactivitiesofMNEsthatstatisticalagenciesinafewcountries,includingtheUnitedStates,Sweden,andJapan,hadcollectedinrecognitionoftheneedforadatacollectionspecificallydesignedtomeasuremultinationalproduction.In2007,EurostatbeganitsfirstdatacollectionofForeignAffiliateStatistics(FATS).

2

However,therehasnotbeenmuchprogressinexpandingthecoverageofthesedataasonlyafewadditionalcountrieshaveintroducedsuchdatacollectionssincethen.

3

Lipsey(2007)founddifferencesbetweenoutwardFDIdatafortheUnitedStatesandstatisticsontheactivitiesofU.S.MNEsabroad,includingtheiremployment,valueaddedandproperty,plantandequipment;thedifferenceswereespeciallysignificantinindustrydistributions.HeattributedthosedifferencestothetaxavoidancestrategiesofU.S.MNEsandtotheincreasingimportanceofintangibleassetsinproduction.

4

1Ownershipof10percentofthevotingpowerofanenterprisebyanon-residentinvestoristakenasevidenceofadirectinvestmentrelationship.

2FATSareforeignaffiliatestatisticsbasedonexhaustiveorquasi-exhaustivecensus-typesurveysofmultinationalenterprises.InwardFATSdescribetheoperatingactivitiesofenterprisesthatarecontrolledbyMNEsthatareresidentinanothercountryoreconomy.Theyincludevariablessuchasemployment,turnover,andvalueaddedandaretypicallycompiledbydevelopedeconomies.TheindicatorinwardforeignaffiliateturnoveremployedinFigure3(y-axis)isanexampleofFATS.TheOECDcollectsstatisticsontheActivitiesofMultinationalEnterprises(AMNE)fromitsmembers;AMNEstatisticscoverFATSaswellasstatisticsontheactivitiesofMNEparentcompanies.

3In2008,theOECD’sBenchmarkDefinitionofForeignDirectInvestment,fourtheditionattemptedtobetteralignFDIstatisticswithmultinationalproductionby,forexample,recommendingtheseparateidentificationofFDItoandfromresidentSpecialPurposeEntitiesandtheclassificationofFDIpositionsbytheUltimateInvestingCountry.

4Foranapproachtoderiveintangibleassetincomefromglobalproductionnetworks,seeChenetal.(2021).

UsingasimilaranalyticalapproachofcomparingFDIandforeignaffiliatesstatistics,Beugelsdijketal.(2010)foundasystematicover-estimationofforeignaffiliates’(FAs)operationsinspecificjurisdictionsclassifiedasoffshorefinancialcenters(OFCs).

5

Conversely,theyalsofindanunderestimationofforeignaffiliateoperations(e.g.,salesorvalueadded)byFDIstatisticsincountrieswithmoreadvancedfinancialsystemsthatisattributedtonon-FDIfinancing(i.e.,financingfromunaffiliatedparties).

LeinoandAli-Yrkkö(2014)studiedFDIasameasureofrealinvestment(grossfixedcapitalformation)inFinnishforeign-ownedcompanies.TheirresultssuggestthattherecordedannualinflowsofFDIdonotconstituteanaccuratemeasureofannualrealinvestmentsinforeign-ownedcompanies.Theyattributedtheseresultstonon-FDIfinancing,theimpactofcross-bordermergersandacquisitions(M&As),andthepresenceofconduitinvestmentinwhichFDIischannelledthroughoneeconomyonitswaytoanothereconomy(alsocalledpass-throughcapitalorcapital-in-transit).

BlanchardandAcalin(2016)assertedaprominentroleforconduitinvestmentinFDIstatisticsbasedontheevidenceofahighcorrelationbetweenquarterlyinwardandoutwardFDIflowsatthecountrylevel.Sauvant(2017)observedthatthevalueoftotalassetsforUnitedStatesforeignaffiliatesin2012largelyexceededUSoutwardFDI:uptotwo-thirdsofforeignaffiliateassetsarenotfinancedbyFDI.

Aspartofabroadercritiqueoftheaccuracyandreliabilityofinternationaleconomicstatistics,LinsiandMugge(2019)havere-ignitedthedebate,exposingthemainfailingsofFDIstatistics,bothintermsofmeasurementaccuracyandintermsofaconcept-measurementgap(i.e.,systematicdifferencesbetweenwhatdataactuallymeasureandwhattheyareexpectedtomeasure).

Inthiscontext,Damgaardetal.(2019)madethreeimportantcontributions.First,itofferedanexhaustiveaccountofthemainstatisticalchallengesrelatedtoFDI,namelytheroleofpass-throughcapitalthroughspecialpurposeentities(SPEs),resultinginFDIstatisticsbyimmediatepartnereconomythatdonotreflecttherealeconomictiesbetweeneconomies.Second,itintroducedawaytoestimatetheSPEcomponentinFDIstatisticsforcountriesthatdonotreportsuchinformation;thisproposaladdstotheotheravailableoptionsfortheestimationofconduitFDI(e.g.,WorldInvestmentReport,2015;Bolwijnetal.,2018).Lastly,andmostimportantly,itprovidedananalyticalproceduretoestimatethedistributionofultimateinvestorstobetterreflectthelocationsoftheinvestorswhohavemadeinvestmentsintosubstantivebusinessesinthathosteconomy.

Onthelastpoint,approximatelyatthesametimeasDamgaardetal.(2019),anUNCTADstudybyCasella(2019)proposedawaytoderivebilateralFDIstocksbyultimateinvestorsbasedonMarkovchainresults,relyingonacompletelydifferentanalyticalapproach.Damgaardetal.(2019)andCasella(2019)bothhavethemeritofaddressingoneofthemostcriticalchallengesofFDIstatistics—thegapbetweenimmediateandultimateinvestors—markingasignificantsteptowardsa“re-conciliation”betweenFDIandmeasuresofinternationalMNEactivity.TheissueofultimateinvestorsinFDIstatisticswillbeextensivelydiscussedin

5Thereisnostrictdefinitionofoffshorefinancialcenters(OFCs),althoughthereisgeneralagreementontheirfeatures.IMF(2020)proposesanoperationaldefinitionthat“anOFCisacenterwherethebulkoffinancialsectoractivityisoffshoreonbothsidesofthebalancesheet,(thatisthecounterpartiesofthemajorityoffinancialinstitutionsliabilitiesandassetsarenon-residents),wherethetransactionsareinitiatedelsewhere,andwherethemajorityoftheinstitutionsinvolvedarecontrolledbynon-residents.Thus,OFCsareusuallyreferredtoas:Jurisdictionsthathaverelativelylargenumbersoffinancialinstitutionsengagedprimarilyinbusinesswithnon-residents;Financialsystemswithexternalassetsandliabilitiesoutofproportiontodomesticfinancialintermediationdesignedtofinancedomesticeconomies;andmorepopularly,centerswhichprovidesomeorallofthefollowingservices:loworzerotaxation;moderateorlightfinancialregulation;bankingsecrecyandanonymity.”Inthecorporatecontext,financialservicesofferedbyOFCscangeneratealargeamountofinwardandoutwardFDI.Hence,thesejurisdictionshavealsobeenrecentlyreferredtoasinvestmenthubs.

sectionIIofthispaper,includingadescriptionandcomparisonoftheDamgaardetal.(2019)andUNCTADMarkovChainmethodologies.

ThepurposeofthispaperistorevisitthemostrecentcritiquesoftheuseofFDIdataasaproxyformultinationalproductionandtooutlinepossiblecounterarguments,mitigatingfactors,andrecentadvancementsinthecompilationofinternationalFDIstatistics.Weconsidersuchabalancedapproachimportantduetoanincreasinglydominantnarrativearound“phantomFDI”thathaslackednuanceinmediacoverage.

6

ResearchersoftenreverttoFDIstatisticsduetotheirbroadgeographicandtimecoveragecomparedtootherdataonmultinationalproduction,especiallyfordevelopingcountries(seeforexampleDemirandDuan,2018;andHarmsandMeon,2018).

7

Itis,hence,usefultore-assesswhatFDIdatacan(andcannot)provide.WefocusonFDIstocks(alsocalledpositions),asopposedtoFDIflows,sincestocksreflectthescaleofmultinationalpresenceinaneconomy.

Ourpaperisorganizedasfollows:SectionsIthroughIIIelaborateonthethreemaincritiquesdirectedatFDIstatisticsasaproxyformultinationalproduction(assummarizedinFigure1).Theystartfromthemostcontentiousissueof“phantomFDI”anditsimpactsonaggregateandonbilateralFDIstatistics(SectionIandII,respectively).SectionIIIbroadenstheperspectiveandquestionsthefundamentalassumptionoftheproductivenatureofFDIfinancing,includingtheproblemoflocalfinancingofMNEs’foreignaffiliateoperations.SectionIVtakesstockofthemaininitiativestakingplaceattheleveloftheinternationalstatisticalcommunitytoaddresstheissuespresentedinSectionsItoIII.AconcludingSectionVthenfollows,withapracticalproposalfor(re-)conciliationbetweenFDIstatisticsandmultinationalproduction.

6ThepaperbyDamgaardetal.(2019)greatlyincreasedpublicawarenessoftheseissues:see“Phantominvestmentcallsforanexorcism”(FinancialTimes,September2019);“PhantomFDIrecordshugegrowth”(fDiIntelligence,December2019)forexamplesofmediacoverage.

7Specifically,fordevelopingcountries,alternativesurvey-basedstatistics,suchasForeignAffiliatestatistics(FATS),arenotavailableapartfromexceptionalcases(e.g.,Thailand,Malaysia,Zambia,India;selectedyears).Firm-leveldata(e.g.,fromORBIS)alsohassevereproblemsofcoverageandavailabilityoffinancialandoperationalinformation,especiallyforforeignaffiliatesinAfricaandLatinAmerica(seeforexamplethediscussioninCobhamandLoretz,2014andTørsløvetal.,2018).Tørsløvetal.(2018)showthatonly17percentofMNEs’consolidatedprofitsasreportedbyORBISarereflectedatthesubsidiarylevel.

Project-leveldataonannouncedgreenfieldprojectsandcross-borderM&Asmaybeamorefeasibleoption.Forexample,Amighinietal.(2017)employgreenfielddatatoanalyzetherelationshipbetweenFDIandcapitalformationindevelopingcountries.However,thesedataalsohavestructuralweaknessesthatsignificantlylimittheirapplication.DataonFDIgreenfieldprojectsandcross-borderM&Asarefromdifferentsourcesandhavedifferentscopes,andthereforecannotbecomparedand/orcombined.Thismakestheirusechallengingwhentheobjectiveistoprovideacomprehensivepictureofmultinationalproduction.Dataongreenfieldprojectsinparticularrefertoannouncedratherthanactuallyimplementedprojects;valuesareoftenestimatedbasedonbenchmarks;andcoverageindevelopingcountriescanbeverypoor.

Figure1.MainCritiquesoftheUseofFDIDatatoMeasureMultinationalProductionandRecent

DevelopmentsandFindings

FDIisaspecificsourceoffundsanddoesnotnecessarilyreflectthescaleofmultinationals’productiveassets(useoffunds);itdoesnotcapturelocalsourcesoffinancingofmultinationaloperations

1.RealandphantomFDIRecentdevelopmentsandfindings

PhantomFDIthroughOFCsaredrivenbyfinancial/taxmotives,weakeningtherelationshipbetweenFDIandinternationalproduction

•PhantomFDIthroughOFCscanbeexcludedfromFDIdataandanalysiseitherdirectly(forthosecountriesthatseparatelyreleasecross-borderstatisticsofspecialpurposeentities)orindirectly,viaestimationtechniques

2.Directandultimateinvestors

OFCsactasmiddlemenbetweeninvestors’countryoforiginandfinaldestination,makingultimate-investorcountriesinvisibleinbilateralFDIstatistics

•StandardFDIreportingisbeingexpandedtoincludestatisticsbasedonultimateinvestors;alternatively,analyticaltechniqueshavebeendevelopedtoestimatebilateralFDIbylocationoftheultimateinvestor

3.Sourceanduseoffunds

•Moresystematic,notanecdotal,analysisoftherelationshipbetweenFDIstatisticsandindicatorsofMNEsforeignoperationsindicatesastronglink,withsignificantdivergenceconfinedtoOFCjurisdictions

I.HowtoUnmask“PhantomFDI”?

Critique1:“PhantomFDI”throughoffshorefinancialcentersisdrivenbyfinancialandtaxmotives,

weakeningtherelationshipbetweenFDIandmultinationalproduction.

MostrecentcriticismoftheuseofFDIstatisticstomeasuremultinationalproductionhasfocusedontheoutsizedroleofoffshorefinancialcenters(OFCs),alsoknownasinvestmenthubs.OFCsmainlyactasintermediatejurisdictionsbetweentheinvestors’economyoforiginandthefinaldestinationofFDI,generating“conduit”or“pass-through”FDI(Damgaardetal,2019;BorgaandCaliandro,2018;Casella,2019).Theymayalsoleadtothe“parking”ofFDIincertaintax-avoidingassets(seeTørsløv,Wier,andZucman,2018)ormaybeusedtoraisefinancing

8

(seeCoppolaetal.,2021;BlanchardandAcalin,2016;Biswasetal.,2022).

ThepresenceofOFCsinflatesFDIstatisticsand,inthemostcommoncaseofconduitstructures,itobscurestheultimateinvestorsofrealFDI.“PhantomFDI”isanexpressionintroducedbyDamgaardetal.(2019)thatbecamequitepopularinthemediatolab