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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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    File URL: https://mpra.ub.uni-muenchen.de/95188/1/MPRA_paper_95188.pdf
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    References listed on IDEAS

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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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