The Missing Wealth of Nations: Are Europe and the U.S. Net Debtors Or Net Creditors?
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THE MISSING WEALTH OF NATIONS: ARE EUROPE AND THE U.S. NET DEBTORS OR NET CREDITORS? DATA APPENDIX Gabriel Zucman Paris School of Economics February 25, 2013 Abstract This data Appendix supplements the paper of the same author “The Missing Wealth of Nations: Are Europe and the U.S. net Debtors or net Creditors?”. The pa- per and the data files are available online at http://www.parisschoolofeconomics. eu/en/zucman-gabriel/. 1 Contents A Global Aggregate Securities Assets (Tables A1 and A4-A9)6 A.1 Key data sources...............................6 A.1.1 The case of Germany.........................7 A.1.2 The case of Singapore........................8 A.1.3 The case of Mauritius........................9 A.2 Correction for the Cayman Islands (Table A6)............... 10 A.2.1 Estimates based on a gravity model of asset holdings....... 10 A.2.2 Estimates based on hedge fund holdings.............. 14 A.2.3 Coherence between both estimates and uncertainties....... 17 A.3 Other corrections for CPIS-reporting countries............... 21 A.3.1 Netherlands SFIs........................... 21 A.3.2 Other................................. 22 A.4 China (Table A7)............................... 22 A.5 Middle Eastern oil exporters (Table A8).................. 24 A.5.1 Available data and assumptions................... 25 A.5.2 Results and discussions........................ 27 A.6 Other countries (Table A9).......................... 31 A.6.1 Private assets............................. 32 A.6.2 Reserve assets............................. 34 A.7 Total securities assets (Tables A1, A4-A5)................. 34 B Global Aggregate Securities Liabilities (Tables A2 and A10-A12) 37 B.1 External Wealth of Nations data....................... 37 B.2 Correction to liabilities reported in EWNII................. 37 B.2.1 No portfolio debt liabilities...................... 37 B.2.2 Netherlands.............................. 38 B.2.3 CPIS-derived liabilities larger than reported liabilities (Table A12) 38 B.3 Small offshore financial centers........................ 41 2 B.3.1 Cayman Islands............................ 42 B.3.2 Other small offshore centers (Tables A10 and A11)........ 47 B.4 Other non-EWNII countries and international organizations....... 49 B.5 Total securities liabilities (Table A2).................... 49 C Bilateral Securities Assets Data (Tables A3 and A13-A18) 50 C.1 Construction of the comprehensive bilateral asset matrices (Table A15). 51 C.1.1 Corrections for CPIS countries.................... 51 C.1.2 Bilateral data for non-CPIS countries................ 53 C.2 Where the missing wealth is invested (Tables A3, A13-A14 and A18).. 55 D Missing Flows in Balance of Payments (Tables A19-A22) 58 D.1 Total credits and debits at the world level (Tables A19-A20)....... 58 D.2 Missing flows at the world level (Table A21)................ 60 D.3 Yields on cross-border bank deposits and portfolio claims (Table A22).. 62 D.4 How transfers of funds to tax havens affect individual countries’ balance of payments.................................. 63 D.4.1 Case 1: U.S. residents carrying banknotes, gold, or diamonds to Switzerland.............................. 63 D.4.2 Case 2: U.S. residents making wire transfers to their Bahamian accounts................................ 65 D.4.3 Case 3: Trade mis-invoicing..................... 66 D.4.4 Case 4: London traders paid on Jersey accounts.......... 68 D.4.5 Case 5: French investors transferring portfolio securities to Swiss custodians............................... 69 D.4.6 Summary............................... 70 E Offshore Fortunes in Switzerland (Tables A23-A26) 74 F Net Foreign Asset Positions (Tables A27-A32) 77 F.1 Official data (Table A27)........................... 77 3 F.2 Corrected net foreign asset positions (Tables A28-A32).......... 79 4 The goal of this Appendix is to allow the reader to reproduce all the results of the paper starting from readily available public statistics. I describe line by line each of the steps that leads from the published data to the results. The Appendix is supplemented by an Excel file containing all relevant formulas and by a set of Stata files.1 The main paper summarizes the key steps. This Appendix gives additional details, provides consistency and robustness checks, compares the choices made in this research with those made in other studies, lists all relevant references, and produces additional results excluded from the main paper for the sake of conciseness. The Appendix is structured as follows: • Section A studies the assets side: starting from the updated and extended version of the External Wealth of Nations database constructed by Lane and Milesi-Ferretti (2007), I explain how I construct estimates of the total amount of securities assets identifiable worldwide. • Section B does the same for the liabilities side. • Section C investigates the discrepancy between total identifiable assets and liabil- ities. In particular, it describes the construction of the 238×238 bilateral assets matrices that reveal the source of the assets-liabilities gap, using bilateral data provided in the IMF Coordinated Portfolio Investment Survey. • Section D studies the anomalies at the flow level, that is, in the world balance of payments and in individual countries’ balances of payments. • Section E gives more details on the offshore fortunes in Switzerland. • Section F lists the complete references used to compute the officially reported net foreign asset positions of rich countries (Figure 1 of the paper), and presents var- ious robustness checks for the claim that the eurozone and the rich world are net creditors, ant not net debtors as in the official statistics. 1Available online at: http://www.parisschoolofeconomics.eu/en/zucman-gabriel/. 5 A Global Aggregate Securities Assets (Tables A1 and A4-A9) A.1 Key data sources The key data source for this research is the updated and extended version of the External Wealth of Nations database (EWNII) constructed by Lane and Milesi-Ferretti(2007), which contains data for 178 economies. I have used the dataset released in August 2009 on Philip Lane’s website.2 Some financial centers are not covered in the August 2009 version of the database, most notably the Cayman Islands, Bermuda, Jersey, Guernsey, and the Isle of Man. But these countries provide data on their aggregate portfolio holdings in the IMF Coordinated Portfolio Investment Survey (CPIS). With a few minor exceptions (detailed below), for the countries i in both datasets, the ˆ aggregate portfolios assets data Ai in the EWNII and the CPIS are rigorously identical. P ˆ So starting with the total assets i Ai in the CPIS or in the EWNII does not make any practical difference. Because the CPIS includes a number of financial centers that are presently excluded from the EWNII, I start with the CPIS world totals. I have worked with the August 2010 release of the CPIS,3 which included final data for 2001-2008. I have not used the preliminary 2009 data. Col. 1 of Table A1 simply reproduces the line “Total value of investment” of Tables 12, 12.1 and 12.2 of the CPIS. In 2008, 74 countries and jurisdictions were participating. Col. 2 reproduces the line “SEFER+SSIO”. It gives the value of the securities held by the reserve managers (central banks) and international organizations that participate in the survey. The list of participants is confidential. By subtracting col. 2 to col. 1, we obtain the value of the privately held portfolios reported in the CPIS. I list below the few cases in which CPIS and EWNII data differ, and I explain why I choose to keep the CPIS data. 2http://www.philiplane.org/EWN.html. 3Downloaded from http://www.imf.org/external/np/sta/pi/cpis.htm. 6 A.1.1 The case of Germany Before 2006, the portfolio asset figures published in the German international investment position were established on the basis of modified cumulated flows, except for the bank- ing sector.4 By contrast, the CPIS data were constructed just like in other countries: using stock position surveys of end-investors and custodians.5 There was consequently a discrepancy between the portfolio figures reported in the IIP (hence in the EWNII) and in the CPIS: between 2001 and 2005, portfolio assets in the IIP were 10-20% larger than in the CPIS (corresponding to a gap of USD 161-265bn). The German Central Bank interpreted the gap as roughly capturing the securities held by German households with nonresident custodians or “on their own account” (i.e., without using any custodian bank at all).6 Since 2006, both the IIP and the CPIS data have been based on a new, high quality security-by-security portfolio stock survey. Accordingly, the IIP (hence EWNII) and CPIS data have been identical since then. In the paper, I use the CPIS data rather than the IIP series, and I do not correct the CPIS figures. I do so for three reasons. First, the methods used by Germany to compile its CPIS data have always been consistent with those used by all other large countries (i.e., stock position surveys covering the household sector through a survey of domestic custodians). Second, if the gap between modified cumulated flows (reported in the IIP before 2006) and the stock surveys really captured portfolios held offshore by the household sector, as the German Central Bank suggests, then I want to include this gap in my estimate of unrecorded offshore assets Ω, which implies to use the CPIS data when reckoning all identifiable securities assets. Lastly, the interpretation of the gap between the stock survey and the cumulated flow estimates is uncertain, so we should not have strong priors on how to deal with it. Many other factors can explain a discrepancy between cumulated flows and stock surveys data, and conversely portfolios held offshore 4See the country notes for Germany in the IMF Balance of Payments Statistics. 5See the metadata for Germany on the CPIS website (available from the author upon request). At the time of this paper, the metadata posted online referred to the procedures used for the conduct of the 2003 CPIS.