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though in most cases this equity simply passes through those countries to be
used for production elsewhere.
To the extent that such “pass-through” equity is recorded in published FDI
flow and position statistics it may create challenges for data users in at least
two ways. First, total flows, including those to SPEs, may overstate the actual
amount of FDI flows that stay in the host economy. For countries hosting many
SPEs, these overstatements may be large, resulting in published FDI statistics
that overstate the impact that FDI has on the host economy since much of the
published flows are capital-in-transit. Second, for large economies with
significant outward FDI flows to SPEs, such as the United States, recording FDI
flows by immediate destination country obscures the ultimate destination and
purpose of those flows.
In 2016, the International Monetary Fund’s (IMF) Committee on Balance of
Payments Statistics set up a Task Force on SPEs (TFSPE). At the conclusion of
its work in 2018, the TFSPE proposed a definition of SPEs to be used for
1
collection and analysis of macroeconomic statistics. Under the definition, an
institutional unit that meets all four of the following criteria is considered an
SPE: (1) a maximum of five employees and little or no physical presence; (2)
direct or indirect control by nonresidents; (3) established to obtain specific
advantages, such as access to capital markets, financial services, risk
mitigation, or tax or regulatory minimization; and (4) transactions almost
entirely with nonresidents. The TFSPE recognized that one important activity
of SPEs is holding assets for use elsewhere as pass-through equity.
This paper marks the first attempt to use data from the U.S. Bureau of
Economic Analysis (BEA) to understand the prevalence of SPEs and their use
of pass-through equity in U.S. FDI statistics. Pass-through equity is measured
using company-level microdata according to a method proposed in a recent
2
working paper by OECD economists. Identifying SPEs and measuring pass-
through equity enhances understanding of global macroeconomic statistics in
three ways: (1) it illuminates the extent to which SPEs are used as pass-through
vehicles by U.S. and foreign MNEs, (2) it provides evidence of whether SPEs
are used for purposes other than passing equity to other destinations, such as
for holding intellectual property, and (3) it provides information on the
engagement of non-SPE firms in pass-through activity. Although the TFSPE
focused on resident SPEs, this paper focuses primarily on nonresident SPEs as

1 IMF Committee on Balance of Payments Statistics. “Final Report of the T ask Force on Special
Purpose Entities.” 31 Meeting: Washington, D.C., October 24-26, 2018.
st
https://www.imf.org/external/pubs/ft/bop/2018/pdf/18-03.pdf.
Borga, Maria, and Ceclia Caliandro. “Eliminating the Pass-Through: Towards FDI Statistics that
2
Better Capture the Financial and Economic Linkages Between Countries.” National Bureau of
Economic Research Working Paper 25029: Cambridge, MA, September 2018.
https://www.nber.org/papers/w25029.pdf.
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