Working Paper: CEPR ID: DP14508
Authors: Antonio Coppola; Matteo Maggiori; Brent Neiman; Jesse Schreger
Abstract: Global firms finance themselves through foreign subsidiaries, often shell companiesin tax havens, which obscures their true economic location in official statistics. Weassociate the universe of traded securities issued by firms in tax havens with theirissuer’s ultimate parent and restate bilateral investment positions to better reflectthe financial linkages connecting countries around the world. Portfolio investmentfrom developed countries to firms in large emerging markets is dramatically largerthan 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’sofficial 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 understandingof the currency composition of external portfolio liabilities and the nature of foreigndirect investment. Finally, we provide additional restatements of bilateral investmentpositions, including one based the geographic distribution of sales.
Keywords: No keywords provided
JEL Codes: E01; E44; F21; F23; F32; F34; G11; G15; G32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| tax havens (H26) | misrepresentation of global capital flows (F32) |
| offshore issuance (G24) | reported foreign direct investment (FDI) (F21) |
| offshore issuance (G24) | portfolio liabilities (G19) |
| use of tax havens (H26) | overstatement of China’s net creditor position (F30) |
| reliance on variable interest entities (VIEs) (G32) | mismeasurement of China’s net foreign asset position (F30) |