Financial Centres and the Geography of Capital Flows

A geographical mismatch is evident in portfolio flows data. Because the data collection system was designed to measure cross‐border transactions with foreign counterparties who are often intermediaries, the majority of flows are attributed to financial centres. We quantify this geographical mismatch by using the bilateral capital flows data to estimate bilateral debt and equity positions between the USA and over 40 countries and comparing those estimates with data from benchmark surveys. Our findings have implications for researchers and policy makers who use capital flows data or flows‐based positions estimates.