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Grey ZOnes in Global Finance: the Distorted Geography of Cross Border Investments

Author

Listed:
  • Vincent Vicard

    (CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique)

  • Guillin Amélie

Abstract

Tax avoidance schemes generate artificially complex cross-border financial structures inflatingmeasured international investment stocks in tax havens. Using a standard gravity framework, weestimate that about 40\% of global assets (FDI, portfolio equity and debt) are 'abnormal' -unexplained - stocks. Abnormal stocks are increasing over time and concentrated in a limitednumber of jurisdictions. Six jurisdictions including three European countries are the largestcontributors: Cayman, Bermuda, Luxembourg, Hong Kong, Ireland and the Netherlands.Interestingly, the Luxleaks in 2014 do not appear to have diverted cross-border investments away

Suggested Citation

  • Vincent Vicard & Guillin Amélie, 2021. "Grey ZOnes in Global Finance: the Distorted Geography of Cross Border Investments," Working Papers hal-03101473, HAL.
    • Handle: RePEc:hal:wpaper:hal-03101473
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    Cited by:

    1. is not listed on IDEAS
    2. Bricongne, Jean-Charles & Delpeuch, Samuel & Lopez-Forero, Margarita, 2023. "Productivity slowdown and tax havens: Where is measured value creation?," Journal of International Economics, Elsevier, vol. 143(C).
    3. Li, Chang & Wang, Chu & Yang, Lianxing & Chu, Baoju, 2023. "Impact of cultural trade on foreign direct investment: Evidence from China," Emerging Markets Review, Elsevier, vol. 55(C).
    4. Manon Francois & Vincent Vicard, 2023. "Tax avoidance and the complexity of multinational enterprises," Working Papers 015, EU Tax Observatory.
    5. Maria Siranova & Menbere Workie Tiruneh & Brian Konig, 2024. "From abnormal FDI to a normal driver of sudden stop episodes," Working Papers 2024.02, International Network for Economic Research - INFER.
    6. Albori, Marco & Anzuini, Alessio & Ferriani, Fabrizio & Rossi, Luca, 2024. "The gravity of Offshore Financial Centers: Estimating real FDIs using a binary choice model," International Economics, Elsevier, vol. 178(C).
    7. Manon François & Vincent Vicard, 2023. "Tax Avoidance and the Complexity of Multinational Enterprises," Working Papers halshs-04103793, HAL.
    8. Lorenzo Garlanda-Longueville & Mathias Lé & Kevin Parra Ramirez, 2025. "Why Do Banks Have So Much Debt In Tax Havens?," EconomiX Working Papers 2025-43, University of Paris Nanterre, EconomiX.

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    Keywords

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    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm

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