Maria E. de Boyrie

Estimating the magnitude of capital flight due to abnormal pricing in international trade: The Russia–USA case

Abstract Governmental and international lending agencies, as well as private sector firms, who engage in international trade, have long been concerned with detecting and determining the magnitude of abnormal pricing in international trade. To detect such abnormal pricings, we present a framework analyzing millions of import/export transactions between the U.S. and Russia. The objectives of this study are to estimate the economic impact of over-invoiced/under-invoiced Russian imports/exports from/to the U.S. and to determine if capital movement/capital flight through trade is due to money laundering, tax evasion or some sort of portfolio consideration. Our results lead us to conclude that capital movement through trade in this case can be attributed to either money laundering and/or tax evasion.

The impact of Switzerland's money laundering law on capital flows through abnormal pricing in international trade

The objective of this research is to determine the impact of Switzerlands money laundering law on the movement of money through false invoicing in international trade. This study evaluates every reported import and export transaction between the USA and Switzerland during the period 1995–2000. The study indicates that there were significant changes in the degree of abnormal international trade pricing subsequent to the enactment of Switzerlands antimoney laundering law. The study supports the view that individuals and companies will find substitute techniques and channels to launder money when central banking authorities enact legislation that only focuses on financial institutions.

Capital movement through trade misinvoicing: the case of Africa

Purpose – The purpose of this paper is to identify capital flows due to trade misinvoicing in 30 African nations.Design/methodology/approach – Data from 30 African nations were examined for deviations from average import and export prices as an indicator of capital flows This paper uses US customs data to document the amount of capital flows which may be hidden in commodity trade. Deviations from average prices (price filter matrix) within these commodity classes are used to identify abnormal prices and to produce conservative estimates of the amount of capital movement from 30 countries in Africa to the USA.Findings – The results of this study demonstrate that, between 2000 and 2005, capital outflows from all 58 countries in Africa to the USA grew by more than 50 percent, through both low‐priced exports and high‐priced imports.Research limitations/implications – A clear understanding as to the true purpose of the overall capital movement is not easy to determine from the data. Approximately half of the c...

Money Laundering and Income Tax Evasion: The Determination of Optimal Audits and Inspections to Detect Abnormal Prices in International Trade

Presents a statistical auditing system which gives a methodology for statistical analysis of international trade prices. Discusses how this can help governments and international lending agencies, or internationally trading firms, determine the optimal level of audits and physical inspections of cargoes in order to detect abnormally priced imports and exports, using a cost ‐ benefit approach. Applies a computer program to analyse transactions in any commodity between the USA and any other country, and describes the data set and methodology for determining upper and lower bound prices, using the inter‐quartile range as the benchmark for determining abnormality. Presents results from earlier studies and gives an example of how the proposed statistical auditing system can be used.

Structural Changes, Causality, and Foreign Direct Investments: Evidence from the Asian Crises of 1997

This study attempts to determine three things: (1) whether structural changes or shifts exist in the outward foreign direct investment (FDI) data from OECD countries to eight Asian countries, (2) if a linkage exists across OECD FDI flow patterns, and (3) whether the determinants of FDI are consistently the same during the different periods as determined by structural breaks. In order to estimate the structural breaks, Bai and Perron’s (1998, 2003) model is utilized because it allows for more than one break in the data. Because the time of the 1997–1998 Asian financial crisis is of interest, the breaks are associated with this event. The results of the principal component analysis show that the signs of the explanatory variables differ from those previously found in the literature. The correlation coefficients between FDI and trade openness, the most significant explanatory variable in the study, are positive and significant for all countries and all periods with the exception of Thailand during the pre pre-crisis period. For most of the periods studied, some sort of Granger causality seemed to exist between FDI and trade openness, mostly in the form of feedback.This study attempts to determine three things: (1) whether structural changes or shifts exist in the outward foreign direct investment (FDI) data from OECD countries to eight Asian countries, (2) if a linkage exists across OECD FDI flow patterns, and (3) whether the determinants of FDI are consistently the same during the different periods as determined by structural breaks. In order to estimate the structural breaks, Bai and Perrons (1998, 2003) model is utilized because it allows for more than one break in the data. Because the time of the 19971998 Asian financial crisis is of interest, the breaks are associated with this event. The results of the principal component analysis show that the signs of the explanatory variables differ from those previously found in the literature. The correlation coefficients between FDI and trade openness, the most significant explanatory variable in the study, are positive and significant for all countries and all periods with the exception of Thailand during the pre pre-crisis period. For most of the periods studied, some sort of Granger causality seemed to exist between FDI and trade openness, mostly in the form of feedback.

Dynamic interdependence of sovereign credit default swaps in BRICS and MIST countries

ABSTRACT This article examines the interactions of emerging markets sovereign credit default swaps (CDS). Using a generalized vector autoregressive framework and principal component analysis, we find significant spillover effects within the two groups of emerging markets under study. Using the principal component analysis, we show that global financial market factors are important drivers of BRICS and MIST sovereign CDS spreads variability. Focusing on the forecast error variance decomposition, most of the spillover effects are documented among the emerging markets CDS. Brazil and Mexico contribute the largest net directional spillovers to the other emerging markets studied. Highlights: There exist significant CDS spillover effects for MIST and BRICS countries. Mexico dominates the spillover effects within the MIST group while Brazil dominates the spillover effects within the BRICS group. As determined by principal component analysis, global financial market factors are important drivers of BRICS and MIST sovereign CDS spreads variability. There exists a relatively small net directional spillover from global financial market factors to the countries under study; however, the total spillover is time-varying. A large proportion of the forecast error variance in the markets studied comes from spillovers.

Thailand Capital Flight through Trade with the US During Times of Political and Economic Instability

This paper investigates capital flight from Thailand to the US through trade misinvoicing during the period from 1990 to 2005. The evidence indicates that capital flight from Thailand to the US, valued over US

The effects of trade agreements on the growth of major Latin American economies

16,189 million, had been done through under-invoicing exports to the US rather than over-invoicing imports from the US. The major incentive for the movement of capital is investment, followed by political events in Thailand, and the most significant determinants of capital flight are the US T-bill rate, the deposit rate in Thailand, and the degree of overvaluation of the Thai Baht. Interestingly, the 1997 Asian economic crisis did not play a significant role in the capital movement through trade.

Are High Stock Market Prices Justified

While the connection between trade openness and economic growth is generally assumed to be positive, empirically, it is not clearly demonstrable. Examinations of the relationship between trade and growth have taken a number of approaches, differing both in the empirical methods, as well as the proxies employed for trade openness, trade liberalization, and growth, but results have been decidedly mixed. Our research differs from prior studies in that it does not examine whether trade policy, trade liberalization or the level of trade itself enhances GDP; but rather whether participating in a specific type of trade agreement/union and/or the number of trade agreements to which a given country or region belongs enhances a countrys level of growth. For this purpose, we study the relationship between trade agreements and growth for 18 Latin American countries between 1960 and 2008. Empirical analysis uses an adaptation of the neoclassical Solow growth model. Even though supporters of globalization advance the notion that involvement in trade agreements will help a countrys economy, our findings suggest that that may not be consistently so.

Uncovered Interest Rate Parity, Carry Trade, and Country Equity Return Differentials

To justify high market prices does not require a radical departure from the traditional valuation model. Extraordinarily high market prices relative to current cash flow can be justified by the discounted cash flow model if both the assumptions of the combination of high supernormal growth rate of cash flows and the length of time supernormal growth rates persist remain unspecified and unquestioned. The model here can be used to analyze high market valuations in terms of the time supernormal growth must last to justify these prices at any given level of growth rate.