Page 408 - Special Topic Session (STS) - Volume 3

STS552 Carol C. Bertaut et al.

Financial integration and globalization:
challenges and opportunities for external
financial statistics
Carol C. Bertaut, Beau Bressler, Stephanie Curcuru
Division of International Finance at the Board of Governors of the Federal Reserve System

Abstract
The official framework for external financial statistics is according to the concept
of country of legal residence. This concept provides increasing challenges for
both data compilers and end-users, because the growing use of low-tax
jurisdictions as locations for firm headquarters and the proliferation of offshore
financing vehicles means there is an increasing disconnect between legal
residence and actual economic exposures. The growing size, number, and
geographic diversity of multinational firms generates additional challenges, as
corporate events involving multinationals can leave large imprints on official
statistics. Residence-based statistics can thus distort conclusions drawn about
investment motivations and the true extent of external exposures. However, new
data sources and “big data” techniques can provide new opportunities for data
compilers to combine data sets and generate additional presentations of
external statistics in ways that can help us better understand investor exposures
and financial linkages in our increasingly interconnected world. The views
expressed are solely the responsibility of the authors and should not be
interpreted as reflecting the views of the Board of Governors of the Federal
Reserve System or of any other person associated with the Federal Reserve
System.

Keywords
Financial Integration, Multinationals, International Portfolios, Tax Havens

1. Introduction
After the global financial crisis, the G20 supported several efforts to produce
improved global capital flow and investment statistics, with the goal of a better
understanding of cross-border linkages and investor exposures. With respect
to cross-border portfolio investment – cross-border flows and positions in
bonds and equity – these initiatives included increased participation in the IMF’s
Coordinated Portfolio Investment Survey (CPIS), and efforts to increase both
frequency and granularity of the CPIS, including providing detail on issuer and
investor sectors. However, these efforts to improve the coverage of global
portfolio assets and liabilities are not sufficient to gain a thorough
understanding of global capital movements due to an ongoing fundamental
limitation: These statistics use the official balance of payments (BOP) framework

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