Filling the gap : the geographical allocation of euro area portfolio investment liabilities and related income

This paper presents the estimation method used to break down the euro area portfolio investment liabilities in the international investment position (i.i.p.) and their corresponding income debits in the balance of payments (b.o.p.), by main geographical counterpart. Identifying non-resident investors in euro area portfolio investment liabilities (i.e. equity and debt securities issued by euro area residents) is a complex task, as securities are regularly traded in secondary markets and held via custodians and other financial intermediaries. Consequently, identifying the actual holders of euro area securities may be hampered by so-called "first-known counterparty" and/or "custodial" biases if statisticians cannot look through the chain of intermediaries. Owing to these difficulties, the geographical counterpart allocation of euro area portfolio investment liabilities cannot generally be directly collected from reporting agents (i.e. the issuers of euro area securities) but instead needs to be estimated. The estimation method presented in this document relies on a comprehensive set of so-called "mirror" datasets (i.e. information on the holders of euro area securities) supported by temporal disaggregation and econometric techniques. The results provide robust estimates of portfolio investment liabilities and income debits by geographical counterpart.