Determinants of Trade Misinvoicing

Abstract

Traditional explanations for trade misinvoicing --high custom duties and weak domestic economies -are less persuasive in a world of high growth emerging markets who have low trade barriers. We construct a 35-country data set over a 26 year span, covering both industrialised and developing countries, to study the phenomena of export and import misinvoicing. Capital account openness, differentials in interest rates, political stability, corruption, indebtedness and the exchange rate regime are identified as factors related to misinvoicing. Trade misinvoicing should be seen as one element of de facto capital account openness.

Capital Flight and Trade Misinvoicing in Zimbabwe

“…The sum of the two gives the total capital that flows illegally in and out of Zimbabwe. This study follows existing literature (Boyce and Ndikumana, ; Beja, ; Buehn and Eichler, ; Patnaik et al ., ; Kar and LeBlanc, ) in estimating trade misinvoicing.…”

“…Other existing studies that estimate trade misinvoicing, but do not focus on Zimbabwe, are Beja () for China; Rustomjee () and Wood and Moll () for South Africa; Yalta and Demir () for Turkey; and Patnaik et al . () for developing countries.…”

Magic mirror in my hand … How trade mirror statistics can help us detect illegal financial flows

“…De Boyrie, Pak, and Zdanowicz () concentrate on potential price misreporting: holding discrepancies between international prices and prices applied in bilateral trade between Russia and the United States in the early 1990s as signals of illegal trade conducive to capital flight, they explain such discrepancies by adopting a portfolio approach, including interest and inflation rate differentials and exchange rate volatility as potential determinants. Patnaik, Gupta, and Shah () add to this lot political and economic stability and exchange rate volatility. Buehn and Eichler (), alongside tax rates, tariffs and the probability of detection, take also into account the existence of foreign currency black markets in the countries examined with the resulting misalignments between the official and the underground exchange rate as potential source of illicit profits.…”

Misinvoicing in mineral trade: what do we really know?

“…However, with sufficiently stringent controls, capital may choose to move through the route of misinvoiced trade (Tandon and Kavita Rao 2017, p. 10). Results by Patnaik et al (2010) suggest that trade misinvoicing should be seen as one element of de facto openness on the capital account: BEconomic agents who desire capital movements for traditional reasons such as financial portfolio diversification, bets on exchange rate movements, are likely to achieve these movements through trade misinvoicing. To the extent that misinvoicing is feasible, countries do not have a choice about embarking on high capital account openness once they have adopted high current account openness.Ŝ tudies of trade misinvoicing commonly rely on a mirror analysis of trade data, where the value of exports of a particular good from country A to country B according to country A's export data is compared to the value of imports of the same good to country B from country A according to country B's import data.…”