Behind the Numbers U.S. Trade in the World Economy (1992) / Chapter Skim
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6. International Capital Flows
6. International Capital Flows
Pages 156-176
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From page 156... ...
gaps. Although the United States collects as much detailed data on its capital flows as any country in the world, the explosion in direct and portfolio investments across U.S.
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In addition, since net capital flows should match the balance of international transactions in goods and services and transfers {the current account) , improved information on capital flows would help illuminate the accuracy of data on the U.S.
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government agencies that possess relevant information (Bureau of Economic Analysis, 1990cJ. Private capital flows encompass direct investment and portfolio investment undertaken by both U.S.
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The responsibility of gathering data on private capital flows is divided between BEA and Treasury.2 BEA collects information on direct investment and Treasury, using Federal Reserve banks as agents, compiles data on portfolio investment. The two data systems have evolved together over the years and reflect a high degree of collaboration between the two agencies.
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From page 160... ...
parent corporations filed complete financial and operating data on their own operations, and 18,339 reports on their investment positions and transactions with their foreign affiliates. The most recent benchmark survey of foreign direct investment in the United States was undertaken for 1987.
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"Secondary suppressions" also are imposed to prevent derivation of such cells by subtraction. To augment the content of the information on foreign direct investment in the United States, the Foreign Direct Investment and International Financial Data Improvements Act of 1990 provides that the Census Bureau exchange information with BEA on data collected on business enterprises operating in the United States.
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PORTFOLIO INVESTMENT DATA The Treasury International Capital iTIC) reporting system, with Federal Reserve banks serving as agents for the Treasury Department, provides monthly and quarterly data on holdings of, and on transactions in, portfolio investment: investment in the forms of debt instruments between unaffiliated parties, equity positions of less than 10 percent, and other claims and liabilities (Bureau of Economic Analysis, 1990c:141.
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TIC forms are filed with district Federal Reserve banks by banks and banking institutions and with the Federal Reserve Bank of New York by all brokers, dealers, and corporations. The costs to the Federal Reserve banks of collecting the TIC data are borne by their own budgets.
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Treasury, in turn, transmits aggregate TIC data to BEA, which uses the TIC data to estimate portfolio investment income and compile capital flow statistics for the balance-of-payments accounts. LIMITATIONS OF THE DATA Under the current reporting systems, data on direct investment appear to provide a reasonably accurate picture of these transactions, although problems remain.
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An a mea casts, ALA IS currently adjusting its data to A__ 1 · · . 1 ~ · ~~ ~ account for capital flows related to establishment or acquisition of new affiliates by foreign direct investors.
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direct investment abroad can result from differing cyclical conditions in the United States and abroad, as well as from variations in foreign exchange rates, the drastic differences in their magnitudes and trends raise concerns about the underlying causes for the relatively small income payments on foreign direct investment in the United States. Deliberate understatements of incomes by filers (often through transfer-pricing practices)
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The last Treasury Department benchmark survey of U.S. portfolio investment abroad was undertaken curing Woric]
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data show the bulk of recorded transactions for major foreign financial centers, regardless of whether the ultimate buyer or seller actually resides in those locations. In those foreign financial centers, the statistical offices tend to net out their foreign-to-foreign transactions on the ground they have no relation to the economies of those centers, so that it is not possible, in most cases, to rely on data collected by partner countries as a check on the data available to the home country.
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This process is partly driven by the tightening of minimum capital standards for internationally active banks by the Basle Committee on Banking Supervision, which indirectly encourages banks to do business in ways that do not appear directly on their balance sheets. Under these circumstances, it is unlikely these transactions are included in the TIC reporting system.
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In September 1990, for example, TIC data on U.S. nonbank financial assets abroad {including bank custodial accounts for nonbanks)
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A 1986 study on statistical discrepancies in the worId's current account identified portfolio investment incomes as one of the most serious problem areas (International Monetary Fund, 1986a)
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These efforts should yield insights into ways of enhancing the accuracy of existing U.S. portfolio investment data and lead to more accurate estimates of incomes from such investments.
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Recommendation 6-7 The Bureau of Economic Analysis, in cooperation with the Internal Revenue Service of the Treasury Department, should examine the causes of the relatively low income payments on foreign direct investment in the United States. Recommendation 6-8 Additional efforts are needed to exploit more fully the analytic potential of existing data on U.S.
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