Through a Glass Darkly: The Content of Statistical Data on Foreign Direct Investment

With the advancement of globalization, the role of foreign direct investment has grown rapidly both in the global economy and in individual national economies. As such, their analysis is unavoidable when examining practically any economic phenomenon. The main data source used for this purpose is that on foreign direct investment found in the balance of payments. However, the purpose of a balance of payments is to record how and in what form a country executes various financial transactions with the rest of the world. Thus, such data on direct investment does not necessarily correspond fully to the direct investment content of economic analysis. During the crisis, the increase in the use of transactions aimed at loss reduction and tax optimization by multinational companies has resulted in an even greater gap between the data and the phenomenon being analysed. Therefore the authors would like to emphasize that one needs to be very circumspect when analysing such data.* Journal of Economic Literature (JEL) code: F21, C80.