Creating the illicit capital flows network in Europe – Do the net errors and omissions follow an economic pattern?

Širaňová, Mária; Tiruneh, Menbere Workie; Fisera, Boris

doi:10.1016/j.iref.2020.10.020

Cited by 8 publications

(5 citation statements)

References 31 publications

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“…Rather, they believe that these tax strategies can be used to exploit differences in tax treatment and avoid double taxation of corporate income. Siranova et al (2021) used FDI and capital flows of the public sector (external debt) to estimate illicit financial flows in Europe using a net errors omissions model. For instance, Edoun et al (2016) explain that most FDI inflows in Africa are the modus operandi behind tax evasion.…”

Section: Fdi and Illicit Financial Flowsmentioning

confidence: 99%

“…The role of FDI in facilitating tax evasion and capital flight has been widely documented in economic literature (Perez et al , 2012; Jones and Temouri, 2016; Edoun et al , 2016; Atems and Mullen, 2016; Merz et al , 2017; Owens et al , 2018; Damgaard et al , 2019; Siranova et al , 2021). Perez et al (2012) examine the role of FDI in facilitating money laundering and IFFs in transition economies and find that up to 10% of total FDI outflows and 20% of FDI to tax havens are connected with illicit money flows.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Siranova et al (2021) used FDI and capital flows of the public sector (external debt) to estimate illicit financial flows in Europe using a net errors omissions model. For instance, Edoun et al (2016) explain that most FDI inflows in Africa are the modus operandi behind tax evasion.…”

Section: Literature Reviewmentioning

confidence: 99%

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Does blacklisting cause a boomerang effect in combating illicit financial flows? Evidence from developing countries

Yeo,

Ahizi,

Coulibaly

2023

JFC

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Purpose Tax evasion and money laundering have become important sources of illicit financial flows in developing countries. Foreign capital flows used by shell corporates are generally with no real economic activities but motivated by harmful tax practices, thereby inducing loss of revenue for developing countries. Despite the coercive actions, such as backlisting of noncooperative jurisdictions to anti-money laundering and countering terrorism financing standards, illicit financial activities are still eroding the tax base in developing countries. The purpose of the paper is to assess the blacklisting effectiveness as a coercive policy against illicit financial activities. Design/methodology/approach This paper applies a propensity score matching strategy to a sample of 118 developing jurisdictions from 2009 to 2017 to evaluate changes in illicit financial activities following the blacklisting. Findings The results show that rather than altering illicit inflows in blacklisted countries, financial restrictions have produced the inverse, causing a boomerang effect on financial crime activities. The illicit share of capital inflows increases on average by 6 percentage points and 0.7% of GDP following the blacklisting. These results are robust to alternative matching methods and to the hidden bias problem. Originality/value Most of the previous research analyzed the link between blacklisting and fiscal revenues. However, here, the study analyzes whether blacklisting makes countries more cooperative in terms of fighting illicit financial flows.

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Section: Fdi and Illicit Financial Flowsmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

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Does blacklisting cause a boomerang effect in combating illicit financial flows? Evidence from developing countries

Yeo,

Ahizi,

Coulibaly

2023

JFC

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“…As a result, in the final step of our empirical analysis, we investigate the role of illicit capital flows. To measure the illicit capital flows, we use the standard approach and use the Net Errors and Omissions (NEO) from the balance of payments expressed as a percentage of GDP as our measure of illicit capital flows (Siranova et al, 2021). First, we study the role of the magnitude of illicit capital flows in affecting the relationship between depreciation and external debt.…”

Section: Exchange Rate and External Debt: Conditionalitymentioning

confidence: 99%

Currency depreciations in emerging economies: A blessing or a curse for external debt management?

Fisera

Tiruneh

Hojdan

2021

International Economics

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“…Complex network methods have also been adopted to explore the spillover effects of foreign capital between stock markets and other financial assets [ 7 ]. Furthermore, the construction and examination of illicit capital flow networks using omission measurements have been carried out [ 8 ]. Despite these advancements, understanding of the intricate interactions within a company’s capital flow network remains limited.…”

Section: Introductionmentioning

confidence: 99%

Spreading Dynamics of Capital Flow Transfer in Complex Financial Networks

Peng,

Chen,

Zheng

et al. 2023

Entropy

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The financial system, a complex network, operates primarily through the exchange of capital, where the role of information is critical. This study utilizes the transfer entropy method to examine the strength and direction of information flow among different capital flow time series and investigate the community structure within the transfer networks. Moreover, the spreading dynamics of the capital flow transfer networks are observed, and the importance and traveling time of each node are explored. The results imply a dominant role for the food and drink industry within the Chinese market, with increased attention towards the computer industry starting in 2014. The community structure of the capital flow transfer networks significantly differs from those constructed from stock prices, with the main sector predominantly encompassing industry leaders favored by primary funds with robust capital flow connections. The average traveling time from sectors such as food and drink, coal, and utilities to other sectors is the shortest, and the dynamic flow between these sectors displays a significant role. These findings highlight that comprehension of information flow and community structure within the financial system can offer valuable insights into market dynamics and help to identify key sectors and companies.

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Creating the illicit capital flows network in Europe – Do the net errors and omissions follow an economic pattern?

Cited by 8 publications

References 31 publications

Does blacklisting cause a boomerang effect in combating illicit financial flows? Evidence from developing countries

Does blacklisting cause a boomerang effect in combating illicit financial flows? Evidence from developing countries

Currency depreciations in emerging economies: A blessing or a curse for external debt management?

Spreading Dynamics of Capital Flow Transfer in Complex Financial Networks

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