Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/141281
Authors: 
Nitsch, Volker
Year of Publication: 
2016
Series/Report no.: 
Darmstadt Discussion Papers in Economics 227
Abstract: 
Recent estimates suggest that developing countries lose about 1 trillion US dollars each year due to illicit financial flows. This paper reviews the empirical methodology that underlies those estimates. Various critical aspects of the analytical approach are highlighted, focusing in particular on deficiencies in the use of mirror trade statistics to quantify the extent of capital outflows due to trade misinvoicing. Serious issues in the empirical analysis include, among others, arbitrary assumptions, mixed methodologies and skewed sampling. As a result, it is argued that the quantitative results obtained from those exercises have no substantive meaning. The trillion-dollar estimate of illicit financial flows from developing countries, therefore, lacks evidence and is uncorroborated.
Subjects: 
trade misinvoicing
mispricing
capital flight
JEL: 
F14
F38
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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