Round-Tripping Foreign Direct Investments: What are the Main Factors?

Abstract

FDI round-tripping has become an increasingly important issue in the world economy, with significant implications for tax revenues, regulatory frameworks, and economic policy. Little is known about its importance and characteristics from a country of origin perspective, and thus economic policies are ill-prepared to address it. This study analyzes the determinants of round-tripping in OECD countries and highlights the urgency of addressing it. Key findings reveal that factors such as economic development, tax burdens, institutional quality, and globalization levels significantly influence round-tripping. The results emphasize the need for coordinated international policy efforts to curb the distortions caused by round-tripping and promote transparent investment flows. Addressing round-tripping FDI is essential for ensuring equitable taxation and strengthening the integrity of global financial systems.