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Trade Mispricing and Illicit Flows

Nitsch, Volker (2011)
Trade Mispricing and Illicit Flows.
Report, Primary publication

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Item Type: Report
Type of entry: Primary publication
Title: Trade Mispricing and Illicit Flows
Language: English
Date: 15 September 2011
Place of Publication: Darmstadt
Series: Darmstadt Discussion Papers in Economics
Series Volume: 206

A potential vehicle to move capital unrecorded out of a country is the misinvoicing of international trade transactions. Exporters may understate the export revenue on their invoices and importers may overstate import expenditures, while their trading partners are instructed to deposit the balance for their benefit in a foreign account. Aiming to quantify the extent of trade mispricing, studies have analyzed asymmetries in matched partner trade statistics or examined price anomalies in transaction level price data. This paper critically reviews these empirical approaches and briefly describes an alternative methodology. Overall, the accuracy and reliability of estimates of illicit financial flows based on trade mispricing are questioned. In particular, it is argued that estimates of trade mispricing are critically dependent on assumptions on how to interpret observed asymmetries in trade statistics. For instance, various reasons for discrepancies in bilateral trade statistics are discussed, and incentives for faking trade invoices other than capital flight are highlighted. Also, aggregate trade data may mask considerable variation in trade discrepancies at the transaction level. Most notably, the importance of trade mispricing as a method for the unrecorded cross-border transfer of capital is generally unclear.

URN: urn:nbn:de:tuda-tuprints-47203
Classification DDC: 300 Social sciences > 330 Economics
Divisions: 01 Department of Law and Economics
01 Department of Law and Economics > Volkswirtschaftliche Fachgebiete
01 Department of Law and Economics > Volkswirtschaftliche Fachgebiete > International Economics
Date Deposited: 04 Oct 2011 12:30
Last Modified: 26 Jan 2016 14:57
URI: https://tuprints.ulb.tu-darmstadt.de/id/eprint/4720
PPN: 378142674
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