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Exploring the Borderline Between Direct Investment and Other Types of Investment: The U.S. Treatment

Listed author(s):
  • Ralph Kozlow

    (Bureau of Economic Analysis)

This paper discusses the classification in the U.S. international economic accounts of borderline cases between direct investment and other types of investment. In the fifth edition of the Balance of Payments Manual (BPM5), one of the key steps forward was in the provision of uniform guidelines for identifying direct investment and distinguishing it from other types of investment. BPM4 had defined direct investment only in terms of general conceptual criteria, whose implementation was likely to vary from country to country, resulting in bilateral asymmetries in the classification of investments. Thanks to the more specific guidance in BPM5, gross inconsistencies are now less of a problem. However, borderline cases, not specifically treated in BPM5 (or in its companion volumes or the OECD Benchmark Definition) still exist. These may have become more numerous and more significant over time, as multinational firms have grown in size and in organizational complexity.

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Paper provided by Bureau of Economic Analysis in its series BEA Papers with number 0024.

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Date of creation: Oct 2002
Handle: RePEc:bea:papers:0024
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