Jannick Damgaard, Thomas Elkjaer, and Niels Johannesen
Macro statistics on foreign direct investment (FDI) are blurred by offshore centers with
enormous inward and outward investment positions. This paper uses several new data
sources, both macro and micro, to estimate the global FDI network while disentangling real
investment and phantom investment and allocating real investment to ultimate investor
economies. We find that phantom investment into corporate shells with no substance and no
real links to the local economy may account for almost 40 percent of global FDI. Ignoring
phantom investment and allocating real investment to ultimate investors increases the
explanatory power of standard gravity variables by around 25 percent.
International Monetary Fund. Western Hemisphere Dept.
This Selected Issues paper assesses the recent trends in The Bahamas’ offshore financial center (OFC) and their contribution to the real economy. The Bahamas hosts one of the largest OFCs in the world. International banks are the most important institutions in the Bahamian OFC. Despite a sharp contraction in the size of the offshore sector, the direct impact on the real economy appears to have been modest. The direct contribution of offshore banks to the real economy appears to have remained broadly stable, reflecting an orderly adjustment so far. Strong compliance with anti–money laundering and combating the financing of terrorism and tax transparency standards should help ensure that this orderly adjustment continues.
In March 2009, the Fund established a new Framework Administered Account to administer external financial resources for selected Fund activities (the “SFA Instrument”). The financing of activities under the terms of the SFA Instrument is implemented through the establishment and operation of a subaccount within the SFA. This paper requests Executive Board approval to establish the Caribbean Regional Technical Assistance Center (CARTAC) subaccount (the “Subaccount”) under the terms of the SFA Instrument.
This note documents and assesses the role of small financial centers in the international financial system using a newly-assembled dataset. It presents estimates of the foreign asset and liability positions for a number of the most important small financial centers, and places these into context by calculating the importance of these locations in the global aggregate of cross-border investment positions. It also reports some information on bilateral cross-border investment patterns, highlighting which countries engage in financial trade with small financial centers.
This supplement reviews the data received thus far and the progress made by participating jurisdictions in their dissemination efforts. Data for major jurisdictions that declined to participate are also provided where it is available from published sources. In addition, data on a sample of advanced economies are provided for comparative purposes. The framework identified a minimum set of variables for dissemination and recommended that jurisdictions publish data on those variables although jurisdictions could choose to publish more. Tables 2 and 5 to 13 provide the data received on those variables. The framework also identified additional variables that were to be provided to the Fund to help Fund staff monitor developments in financial centers.
Ms. Esther C Suss, Mr. Oral Williams, and Mr. Chandima Mendis
The paper reviews the development of offshore financial activities in the English-speaking Caribbean islands and takes stock of the size and status of these sectors today. In view of the heightened concerns of the international community about money laundering, the costs and risks to countries of having or establishing offshore sectors have risen considerably.
International Monetary Fund. External Relations Dept.
On July 17, IMF First Deputy Managing Director Anne Krueger addressed a National Bureau for Economic Research (NBER) conference on the lessons to be learned from the Argentina crisis and how these can be used to raise the effectiveness of IMF efforts to prevent and resolve financial crises. Following are edited excerpts from her remarks; the full text is available on the IMF’s website (www.imf.org).