Other publications may include books, quarterly reviews, annual reports and economic bulletins from the ECB, PhD theses and Danmarks Nationalbank’s policies.
Measuring FDI and Its Impact on the Danish Economy
The thesis consists of an introduction and three essays related to the measurement of foreign direct investment (FDI) and its impact on the Danish economy; each essay is self-contained.The first essay (FDI and the External Wealth of Nations: How Important is Valuation?) studies the importance of FDI equity valuation methods. The balance sheet approach used in macroeconomic analysis has increased the focus on stocks of external assets and liabilities, but different valuation practices for FDI positions make cross-country comparisons difficult. To enhance comparability, the recently adopted IMF Balance of Payments and International Investment Position Manual, Sixth Edition, introduces seven valuation methods for unlisted FDI equity. This essay identifies the most generally applicable methods in terms of data requirements and demonstrates, using the Danish international investment position (IIP), that both the choice of valuation method and estimation technique can still fundamentally change a country's external wealth data. The second essay (Forecasting FDI Equity Income for the Danish Balance of Payments) addresses the late and significant revisions that are often observed in FDI equity income in many countries, hampering the quality of preliminary balance of payments statistics. The empirical study tests a range of models on Danish data and finds that forecasts for FDI equity income based on a combination of past profitability and consensus data for changes in expected private consumption growth outperform earlier forecasts solely based on historical profitability. The third and final essay (Productivity Spillovers from FDI: Ownership Structures, Domestic Firm Characteristics, and FDI Characteristics) is the first one to study productivity spillovers from FDI by exploiting the rich details offered by official Danish firm-level panel data. The analysis displays significant evidence of negative spillovers at the aggregate level, but the results differ widely across industries. It also reveals that not including firms under indirect foreign control in the group of foreign firms, as is done in some studies, leads to biased results. With regard to domestic firm characteristics, high export orientation and high competition mitigate some of the negative productivity spillovers. Finally, the estimations show that the negative spillovers largely stem from foreign firms (i) with low productivity, (ii) with high foreign trade orientation, and (iii) ultimately controlled by investors outside Scandinavia.