Working Paper: NBER ID: w26855
Authors: Antonio Coppola; Matteo Maggiori; Brent Neiman; Jesse Schreger
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: Global Capital Flows; Cross-Border Financing; Tax Havens
JEL Codes: E0; F0; G0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| tax havens (H26) | misreported investment positions (F21) |
| tax havens (H26) | understatement of portfolio investments (G15) |
| offshore issuance (G24) | understanding of currency composition of external portfolio liabilities (F31) |
| reliance on offshore issuance (G32) | issuance of bonds through affiliates in tax havens (H26) |