Balance Of Payments Statistics Research Articles

Introducing New Valuation Change Data for U.S. Cross-Border Portfolio Holdings

The most comprehensive data on cross-border capital holdings for the United States come from the Treasury International Capital (TIC) System. These data inform the official U.S. balance of payments statistics and are crucial for understanding U.S. capital flows, their causes, and their effects on the U.S. economy.

The Rise of Crypto-assets: Cool Breeze or Tsunami in Balance of Payments Statistics?

The Rise of Crypto-assets: Cool Breeze or Tsunami in Balance of Payments Statistics?

International business research: The real challenges are data and theory

We agree with Aguinis and Gabriel that, contrary to Eden and Nielsen, international business (IB) is not uniquely complex, but argue that it faces two unique challenges. First, because it deals with cross-country phenomena, IB data are less plentiful and reliable. Second, because IB uses many imported theories, and they tend to be influenced by the national environment of their authors, they often have, taken as is, limited applicability in many of the contexts IB studies. We illustrate our twin points by examining the secondary data used in IB to measure the economic activities of multinational enterprises outside their home country, both at the country level, using foreign direct investment (FDI) data from balance of payments statistics, and at the firm level, using firm-level databases such as Orbis. We document the serious shortcomings of FDI data and the problems encountered in using firm-level data. We then highlight some of the cultural biases inherent in Williamson’s version of transaction cost theory (TCT) but show how they can be overcome to arrive at a richer and more general theory that is applicable to a wider variety of contexts.

Revisiting the Monetary Presentation of the Euro Area Balance of Payments

We explain how the external counterpart of the euro area M3 can be analysed by using the euro area balance of payments (b.o.p.). This is possible because the net external assets of the monetary financial institutions (MFIs) are present in two statistical frameworks that follow similar conventions: the balance sheet items (BSI) of MFIs and the balance of payments statistics. The first step to including external flows in the monetary analysis is to understand the nature of the flows between resident money holders and the rest of the world. This is possible thanks to the monetary presentation of the b.o.p, which provides information on the nature of external transactions and therefore guidance on the persistence of the monetary signal stemming from external flows.Over the past five years, the increase in the euro area’s external competitiveness has given rise to a sustained current account surplus that has consistently supported monetary inflows into the euro area. At the same time, portfolio transactions, which closely reflect financial and monetary policy conditions, have fluctuated significantly, increasing monetary inflows in the period from mid-2012 to mid-2014 and turning them into net outflows during the asset purchase programme (APP) period.

Exploding net errors and omissions as a capital flight phenomenon: the case of Slovakia

ABSTRACTThis article empirically explores determinants of net errors and omissions (NEO) of Slovakia during the 1997–2014 period, with emphasis on the 2008–2014 sub-period when a distinct downturn in the NEO time series is observed. Given the statistically significant link between the evolution of foreign direct investments and NEO, we cannot rule out possible prevalence of tax optimization as a part of capital flight phenomenon in developed countries. Our findings also suggest that services sector plays a pivotal role in determining the adverse NEO development in the post-2008 period. However, given the absence of detailed bidirectional data for trade with services, role of misinvoicing practices in the Slovak balance of payments statistics might not be further investigated. Our results further strengthen the call for a deeper understanding of forces driving the NEO evolution in other developed and developing countries suffering from capital flight phenomenon.

The role of intermediate demand and technology for international competitiveness of the KIBS sector: evidence from European Union countries

ABSTRACTIn this paper, it is tested whether intermediate consumption of knowledge-intensive business services (KIBS) in the economy and technology advancement in the KIBS sector (measured by R&D expenditures) affect the international competitiveness of a country's KIBS sector. First, the definition of KIBS trade, in light of the available data from the balance of payments statistics, is presented. Then, using a panel data set from the EU countries over the period 2000–2009, a panel cointegration approach to estimating the model is adopted. The empirical study shows that among the old EU countries only those with high income are competitive in KIBS exports. Estimation results demonstrate that their competitiveness in KIBS exports is positively determined by domestic and imported KIBS intensity in the economy, as well as by the KIBS sector's technology advancement. The new EU countries usually were not competitive in KIBS exports, and those which were successful in this field seem to have derived their success mainly from international outsourcing rather than from building their own capacities. Their competitiveness in KIBS exports was positively determined by the KIBS sector's endowment in human capital, or via domestic KIBS intensity in the economy together with lower labour costs.

Trading Processing for Goods: A Different View from the Past on Italian Trade Flows?

The new international standards for national accounts and balance of payments statistics (ESA 2010 and BPM6) introduced a new treatment of goods sent abroad for processing without changing ownership, now considered as an exchange of services. In this paper we explore to what extent this innovation affects the structural analysis of Italian trade flows, in particular along the geo-sectoral dimension. We also draw, for the first time, a detailed picture of exports and imports of processing services in order to shed light on how Italian firms participate, through this channel, in global value chains. Our findings largely validate the geo-sectoral interpretations based on the previous statistical standards. The data reveal that Italy is historically a net exporter of processing services, especially for high-technology products; flows are highly concentrated across destinations and sectors.

Trends and structural shifts in health tourism: Evidence from seasonal time-series data on health-related travel spending by Canada during 1970–2010

There has been a growing interest in better understanding the trends and determinants of health tourism activities. While much of the expanding literature on health tourism offers theoretical or qualitative discussion, empirical evidences has been lacking. This study employs Canada's outbound health tourism activities as an example to examine the trends in health tourism and its association with changing domestic health care market characteristics. A time-series model that accounts for potential structural changes in the trend is employed to analyze the quarterly health-related travel spending series reported in the Balance of Payments Statistics (BOPS) during 1970–2010 (n = 156). We identified a structural shift point which marks the start of an accelerated growth of health tourism and a flattened seasonality in such activities. We found that the health tourism activities of Canadian consumers increase when the private investment in medical facilities declines or when the private MPI increases during the years following the structural-change. We discussed the possible linkage of the structural shift to the General Agreement on Trade in Services (GATS), which went into effect in January, 1995.

Mid-Term Evaluation Report on the Enhanced Data Dissemination Initiative Project

This report presents the results of the mid-term evaluation of the Enhanced Data Dissemination Initiative (EDDI) financed by the United Kingdom’s Department for International Development (DFID) covering the period April 1, 2010 to September 30, 2012. The evaluation was conducted internally by the IMF in consultation with DFID. EDDI is a five-year project (April 2010–March 2015) implemented by the IMF to improve macroeconomic statistics in 25 African countries. The project includes modules for sub-groups of countries covering national accounts, monetary statistics, government finance statistics (GFS), balance of payments statistics (BOP), and harmonization of statistics in several regional organizations. The mid-point of a five-year project is an appropriate time for all stakeholders of the project to step back and take stock of what has been accomplished in the first half of the project, what has gone well, what aspects have been disappointing, and what might be adjusted or changed to make the remainder of the project more effective in achieving its objectives. To facilitate this process, questionnaires were developed to obtain feedback from three groups: counterparts in participating countries, IMF module managers and experts, and DFID country and regional advisors. Recommendations made by the stakeholders that will be followed up in the second half of the project are listed as bullets in italics below.

In Search of Lost Capital: An Estimation of Undeclared Portfolio Assets

The analyses of the international investment position and balance of payments statistics suggest that foreign assets held abroad are greatly underestimated, in particular in the sector of portfolio investments. The aim of this work is to test this hypothesis and to estimate the magnitude of under-reported assets. The approach is based on the comparison of mirror statistics on portfolio assets and liabilities, mainly using data coming from the Coordinated Portfolio Investment Survey (CPIS) conducted by the IMF, with the addition of information derived from several international databases. For the years from 2001 to 2010 the global discrepancy is estimated to be equal to 7.3% of world GDP on average. Different criteria have been adopted to attribute the share of the estimated under-reporting, particularly significant in the case of mutual funds issued by Luxembourg and the main off-shore centres, to the main euro area countries. Results vary from 6 to 10 per cent of national GDPs. If these amounts were added to national data, statistical consistency in international statistics would improve.

Coincident Indicators of Capital Flows

Capital flows data from Balance of Payments statistics often lag 3-6 months, which renders timely surveillance and policy deliberation difficult. To address the tension, we propose two coincident composite indicators for capital flows that improve upon existing proxies. We find that the most widely used proxy, the capital tracker, often overpredicts net flows by 30 percent. We augment the tracker into a composite indicator by assigning to it a lesser but optimally estimated weight while incorporating other regional and global coincident correlates of capital flows. The proposed composite indicator of net flows outperforms the capital tracker in its original format. To complement the indicator with an even timelier variant, we also utilize the EPFR high frequency coverage of gross bond and equity flows as an indicator on foreign investors' sentiment.

Coincident Indicators of Capital Flows

Capital flows data from Balance of Payments statistics often lag 3-6 months, which renders timely surveillance and policy deliberation difficult. To address the tension, we propose two coincident composite indicators for capital flows that improve upon existing proxies. We find that the most widely used proxy, the capital tracker, often overpredicts net flows by 30 percent. We augment the tracker into a composite indicator by assigning to it a lesser but optimally estimated weight while incorporating other regional and global coincident correlates of capital flows. The proposed composite indicator of net flows outperforms the capital tracker in its original format. To complement the indicator with an even timelier variant, we also utilize the EPFR high frequency coverage of gross bond and equity flows as an indicator on foreign investors' sentiment.

Consulting the European Central Bank in the Regulatory Field of the National Central Bank of the Member State of the European Union

Article 127(4) and Article 282(5) of the Treaty on the Functioning of the European Union (the TFEU) and Article 4 of the Protocol (No. 4) on the Statute of the European System of Central Banks and of the European Central Bank (the ESCB/ECB Statute) establish legal grounds for consulting the European Central Bank (the ECB) by Union bodies and national authorities.Article 2, Paragraph 1, of Council Decision 98/415/EC of 29 June 1998 on the consultation of the European Central Bank by national authorities regarding draft legislative provisions (Council Decision 98/415/EC) provides a list of the groups of legal relations subject to consultation. The ECB should be consulted on currency matters, means of payment; national central banks; the collection, compilation and distribution of monetary, financial, banking, payment systems and balance of payments statistics; payment and settlement systems; rules applicable to financial institutions insofar as they materially influence the stability of financial institutions and markets.In accordance with Article 2, Paragraph 2, of Council Decision 98/415/EC, the authorities of the Member States, which have not introduced single currency of the EU, the euro, should consult the ECB on any draft legislative provisions on the instruments of monetary policy.Article overviews the experience of the EU Member States in regulating the order for consultation with the ECB in national law systems. The inquiry takes into account the principles of priority of EU primary and secondary law and exclusive competence of the Court of Justice of the EU as laid down in Article 19(3) of the EU Treaty and Article 267 of the TFEU.In the conclusion it is advised to lay in detail the discussed question in the legal system of Lithuania and thus ensure the application of imperative legal norms of the EU law.

FORECASTING FDI EQUITY INCOME FOR THE DANISH BALANCE OF PAYMENTS

Late and significant revisions are often observed in FDI equity income in many countries, hampering the quality of preliminary balance of payments statistics. We test a range of models on Danish data and find that forecasts for FDI equity income based on a combination of past profitability and consensus data for changes in expected private consumption growth outperform forecasts solely based on historical profitability. When the refined models are applied to the Danish balance of payments, the largest improvements are observed for outward and inward FDI separately. Revisions of net FDI equity income only decrease marginally because the significant revisions in gross terms resulting from the historical models have a tendency to (partly) cancel out each other on a net basis.

The Increasing Role of Central and Eastern Europe in the Global Services Offshoring Market: Evidence from Trade Statistics

Many Central and Eastern European countries invigorated by EU enlargement became important locations for offshored service centres. Building on the region’s nearshoring advantages such as geographical-cultural proximity and on its multilingual graduate supply, CEE is likely to utilise more value added and quality-driven services. Trade statistics support the assumption that an expanding export in other business and ICT services has been associated with offshoring services in the six NMS analysed in detail in the paper. The service export data adopted from the Balance of Payments statistics gives a good approximation to indentify those sections of service trade, which can be regarded as offshorable. The paper summarises the additional factors favouring nearshoring (as in CEE locations) over offshoring (e.g. India) and lists several factors besides size why CEE countries cannot outpace India’s market potential.

International Integration and Resilience to Crisis in Transition Economies

The world financial crisis of 2008 affected transition economies (including Eastern Europe and CIS members) in different ways depending on their previous growth patterns and forms of international integration. The sources of diversity have often been overlooked in views of transition as essentially a similar process across all countries. The approach here combines a balance sheet framework with a historical approach revealing the combinations of factors that led to outcomes in individual countries. Differences between countries are demonstrated with an analysis of their different forms of international integration. This is then used within a framework for analysing the effects of the world crisis on individual countries built around four distinct, but often overlapping, stages. The following sections set transition economies within this framework, showing how they differ from each other and the prospects this gives them for future recovery and growth. Impact in each stage is conditioned by the balance sheet situation of main economic actors - following a standard economic model of financial crisis - as shaped by the pre-crisis modes of growth. The analysis uses balance of payments statistics, the authors’ calculations from export statistics and other descriptive statistics on the development of the financial sector in transition countries. It builds also from an institutional analysis of individual economies. The comparative historical methodology is appropriate in view of constraints of a small-N research design of a very heterogeneous group of countries with high degrees of inter-correlation.

Foreign Direct Investment and Innovation in Central and Eastern Europe: Evidence from Estonia

A growing literature is trying to analyse the productivity gap between domestic and foreign firms with differences in innovation indicators. In our paper we analyse the relationship between inward and outward FDI at either company or industry level and the innovation behaviour of companies in Estonia. We use company-level data from three waves of the Community Innovation Surveys, which are combined with financial data from the Estonian Business Register and FDI data from the balance of payments statistics. For the analysis we apply a structural model involving equations on innovation expenditure, innovation outcome and productivity, and also innovation accounting and propensity score matching approaches. Our results show that the higher innovation output of foreign owned companies vanishes after various company characteristics are controlled for, but there were significant differences in innovation inputs such as the higher use of knowledge sourcing and the lower importance of various impeding factors. Outward investment has a positive influence on innovativeness among both domestic and foreign owned companies

The growing current account surpluses in East Asia: the effect of dark matter assets

In a series of papers we have developed the notion that net foreign assets could be better approximated by capitalizing the net investment income line of the balance of payments statistics. Hidden assets or changes in financial costs may change the net return of net foreign assets even when the valuation of assets remains unchanged. By capitalizing the net investment income a more realistic picture emerges on the true burden or return of net foreign assets. This paper estimates external positions for East Asian economies using this methodology and compares the results with that of official accounts. We find that, until the late 1990s, net investment income increased relatively little, signaling that net foreign assets had not grown as suggested by the large current account surpluses of these countries. This is consistent with the fact that the region had attracted large amounts of foreign direct investment, for which the transfer of technology and knowledge are not accurately captured by the valuation of the foreign asset position. Since 2002, however, the trend has reversed, indicating much larger surpluses than officially registered. We discuss individual country cases.

Global Monitoring with the BIS International Banking Statistics

This paper illustrates various applications of the BIS international banking statistics. We first compare international bank flows to measures of real activity and liquidity and show that the international banking system is becoming a more important conduit for the transfer of capital across countries. We then use network analysis tools to construct a bird's eye view of the structure of the international banking market and to identify key financial hubs. Linking this information with balance of payments statistics helps to better understand the role of banks in the financing of current account flows, for example the recycling of petrodollars and Asian surpluses. Finally, the paper illustrates how the BIS statistics can be used to analyze internationally active banks' foreign exposures to credit risk and, thus, spot vulnerabilities in the international banking market.

Republic of Kazakhstan: Report on the Observance of Standards and Codes: Data Module, Response by the Authorities, and Detailed Assessments Using the Data Quality Assessment Framework (DQAF)

The data quality assessment shows that Kazakhstan is in observance of the Special Data Dissemination Standard, meeting the specifications for coverage, periodicity, timeliness, and the dissemination of advance release calendars. Executive Directors have suggested a set of recommendations that are designed to further increase Kazakhstan’s adherence to internationally accepted statistical practices and enhance the analytical usefulness of Kazakhstan’s statistics. Cross-cutting recommendations, national accounts, consumer and producer price indices, government finance statistics, monetary statistics, and balance of payments statistics were reviewed for the recommendations.