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Looking through conduit FDI in search of ultimate investors – a probabilistic approach

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  • Casella, Bruno

Abstract

This paper presents a novel computational method to determine the distribution of ultimate investors in bilateral FDI stock. The approach employs results from the probabilistic theory of absorbing Markov chains. The method allows for the estimation of a bilateral matrix that provides inward positions by ultimate counterparts for over 100 recipient countries, covering 95% of total FDI stock and including many developing countries. Reconstructing the global FDI network by ultimate investors enables a more accurate and complete snapshot of international production than do standalone bilateral FDI statistics. This has considerable implications for policymaking. It also provides more nuanced context to some contemporary developments such as the trade tensions between the United States, China and others, as well as Brexit

Suggested Citation

  • Casella, Bruno, 2019. "Looking through conduit FDI in search of ultimate investors – a probabilistic approach," MPRA Paper 95188, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:95188
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    Cited by:

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    2. Vasily Astrov & Vladislav L. Inozemtsev & Nina Vujanović, 2022. "Monthly Report No. 03/2022," wiiw Monthly Reports 2022-03, The Vienna Institute for International Economic Studies, wiiw.
    3. Yuwan Duan & Erik Dietzenbacher & Bart Los & Ruochen Dai, 2023. "Regional inequality in China during its rise as a giant exporter: A value chain analysis," Journal of Regional Science, Wiley Blackwell, vol. 63(1), pages 148-172, January.
    4. Nadia Accoto & Giacomo Oddo, 2023. "Looking beyond the curtain: pass-through capital and round-tripping in Italy's foreign direct investment," Questioni di Economia e Finanza (Occasional Papers) 762, Bank of Italy, Economic Research and International Relations Area.
    5. Bruno Casella & Baptiste Souillard, . "A new framework to assess the fiscal impact of a global minimum tax on FDI," UNCTAD Transnational Corporations Journal, United Nations Conference on Trade and Development.
    6. Luo, Changyuan & Luo, Qin & Zeng, Shuai, 2022. "Bilateral tax agreement and FDI inflows: Evidence from Hong Kong investment in the Mainland China," China Economic Review, Elsevier, vol. 73(C).
    7. K. Kalotay & A. Sulstarova, 2021. "FDI in the Post-Soviet Space Three Decades after the Disintegration of the Soviet Union," Outlines of global transformations: politics, economics, law, Center for Crisis Society Studies, vol. 14(5).
    8. Nadia Accoto & Valerio Astuti & Costanza Catalano, 2023. "A probabilistic method for reconstructing the foreign direct investments network in search of ultimate host economies," Questioni di Economia e Finanza (Occasional Papers) 760, Bank of Italy, Economic Research and International Relations Area.
    9. Matteo Fiorini & Giorgia Giovannetti & Mauro Lanati & Filippo Santi, 2021. "Asymmetric cultural proximity and greenfield foreign direct investment," The World Economy, Wiley Blackwell, vol. 44(9), pages 2572-2603, September.
    10. Marco Albori & Alessio Anzuini & Fabrizio Ferriani & Luca Rossi, 2023. "The gravity of Offshore Financial Centers: estimating real FDIs using a binary choice model," Questioni di Economia e Finanza (Occasional Papers) 805, Bank of Italy, Economic Research and International Relations Area.
    11. King, Katiuska, 2022. "Foreign direct investment in Latin America from the perspective of illicit financial flows: “cocacolonisation” of saving?," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), April.
    12. Bekkers, Eddy & Lakatos, Csilla & So, Yu Roger & Yuan, Wen Jin & Traverso, Fabio, 2021. "A Global Foreign Direct Investment Stocks Database," Conference papers 333293, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.

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    More about this item

    Keywords

    ultimate investors; bilateral FDI; conduit FDI; international production; absorbing Markov chains;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F3 - International Economics - - International Finance
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F6 - International Economics - - Economic Impacts of Globalization

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