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On the measurement of foreign direct investment and its relationship to activities of multinational corporations

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  • Wacker, Konstantin M.

Abstract

This paper discusses the different concepts of measuring multinational corporations' activities to provide empirical researchers helpful guidelines about which measures to use in their work. I discuss which economic relations exist between the measures and show that a tight relationship can be established in theory and is indeed present in the actual data. A main conclusion is that foreign direct investment (FDI) stock data is generally recommendable to measure the importance of multinational firms but the preferred measure depends on the analytical question under investigation. The second part of the paper argues that estimating the determinants of multinational firms by using static equilibrium models can be quantitatively misleading and hence be problematic for our understanding of multinational firms and for the design of policy. In this context, I suggest some guidelines how data on multinationals could and should be used for empirical estimation. JEL Classification: C51, F2, E01

Suggested Citation

  • Wacker, Konstantin M., 2013. "On the measurement of foreign direct investment and its relationship to activities of multinational corporations," Working Paper Series 1614, European Central Bank.
  • Handle: RePEc:ecb:ecbwps:20131614
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    Cited by:

    1. Katharina van Treeck & K.M. Wacker, 2017. "Financial Globalization and the Labor Share in Developing Countries: The Type of Capital Matters," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 219, Courant Research Centre PEG.
    2. Pareja-Alcaraz, Pablo, 2017. "Chinese investments in Southern Europe's energy sectors: Similarities and divergences in China's strategies in Greece, Italy, Portugal and Spain," Energy Policy, Elsevier, vol. 101(C), pages 700-710.
    3. Yuko Hashimoto & K. M. Wacker, 2016. "The role of information for international capital flows: new evidence from the SDDS," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 152(3), pages 529-557, August.

    More about this item

    Keywords

    balance of payments; FDI; measurement; multinationals;

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • F2 - International Economics - - International Factor Movements and International Business
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts

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