Determinants of Trade Misinvoicing
Trade misinvoicing should be seen as an element of de facto capital account openness. Traditional explanations for trade misinvoicing—high custom duties and weak domestic economies—are less persuasive in a world of high growth emerging markets that have low trade barriers. We construct a 53-country data set over a 26 year span, covering both industrialized 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.
KeywordsTrade Misinvoicing Capital controls Capital account openness Political stability Custom duties
JEL codesF14 F32 F41 F43
This study has been done under the National Institute of Public Finance and Policy-Department of Economic Affairs (NIPFP-DEA) Research Program. The authors are grateful to Sandhya Krishnan for excellent research assistance.
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