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FDI Mismatch, trade Mis-reporting, and hidden capital Movements: The USA - China case

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  • Biswas, Amit K.
  • von Hagen, Jürgen
  • Sarkar, Sandip

Abstract

We analyze the differences between bilateral FDI and trade data reported by the US and by China for the period from 1983 to 2017. Such differences can be interpreted as hidden capital flows. We show that they are economically significant and analyze their dynamics using VAR and ARDL models. We find that hidden capital flows occur in both directions: from China to the US through the trade channel and from the US to China through the FDI channel. Only the latter respond to financial market conditions. In the long run, an increase in hidden capital outflows through the trade channel triggers a hidden capital inflow through the FDI channel.

Suggested Citation

  • Biswas, Amit K. & von Hagen, Jürgen & Sarkar, Sandip, 2022. "FDI Mismatch, trade Mis-reporting, and hidden capital Movements: The USA - China case," Journal of International Money and Finance, Elsevier, vol. 120(C).
    • Handle: RePEc:eee:jimfin:v:120:y:2022:i:c:s0261560621001856
    DOI: 10.1016/j.jimonfin.2021.102534
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    More about this item

    Keywords

    Trade mis-reporting; FDI; Capital flight; Generalized Impulse Response; ARDL;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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