The role of onshore offshore financial centers in the Euro Area
In this paper, Beck et al. look at the role “onshore offshore financial centers” (OOFCs) play in the Euro Area (EA) financial integration. OOFCs in Ireland, Luxembourg, and the Netherlands are onshore markets in the Euro Area and at the same time their financial activities have parallels to those of offshore financial centers. They have dual roles both as a hub of investment fund intermediation and as centers for securities issuance by foreign firms. The authors use data from the European Central Bank’s Securities Holdings Statistics (SHS), which covers the EA countries’ securities investments and data with estimates on fund-level investment for funds domiciled in Luxembourg and Ireland from commercial sources. They find:
- The Euro Area as a whole is less financially integrated with the rest of the world than it appears. Its gross assets and liabilities are smaller than reported in official data. Quantitatively, this happens in large part because Luxembourg and Ireland intermediate fund investment on behalf of the rest of the world.
- Euro Area financial integration is lower than official data implies. Markets are more fragmented, and some of the integration that has occurred is linked more to tax and regulatory arbitrage than to risk-sharing as in the standard economic view.
- Securities issued in OOFCs are more widely held by EA investors (bringing portfolios closer to an international CAPM benchmark) than those issued in national capital markets.
The Geography of Capital Allocation in the Euro Area
Authors: Roland Beck, Antonio Coppola, Angus Lewis, Matteo Maggiori, Martin Schmitz, Jesse Schreger
From: European Central Bank, Stanford University, Columbia Business School,
Offshore centers and Chinese investments
In this paper, Clayton et al. use data on global mutual fund and exchange-traded fund (ETF) holdings from Morningstar, the portfolios of US insurance companies from S&P Global Market Intelligence, as well as the holdings of the Norwegian sovereign wealth fund that are publicly available, to measure foreign investment in Chinese entities on a nationality basis. They find:
In the last twenty years, China’s presence went from raising a negligible amount of capital in these markets to accounting for more than half of equity issuance and around a fifth of global corporate bonds outstanding in tax havens.
China in Tax Havens
Authors: Christopher Clayton, Antonio Coppola, Amanda Dos Santos, Matteo Maggiori, Jesse Schreger
From: Yale School of Management, Stanford Graduate School of Business, Columbia Business School
