What is Real and What is Not in the Global FDI Network?

Macro statistics on foreign direct investment (FDI) are blurred by offshore centers withenormous inward and outward investment positions. This paper uses several new datasources, both macro and micro, to estimate the global FDI network while disentangling realinvestment and phantom investment and allocating real investment to ultimate investoreconomies. We find that phantom investment into corporate shells with no substance and noreal links to the local economy may account for almost 40 percent of global FDI. Ignoringphantom investment and allocating real investment to ultimate investors increases theexplanatory power of standard gravity variables by around 25 percent