A spectre is haunting the global economic system.
"Phantom" foreign direct investment now accounts for 40 per cent of the global stock of foreign direct investment, or around US$15 trillion ($23.3t) in total, according to IMF research.
This capital, equivalent to the annual national income of China and Germany combined, plays no productive role in the economies which host it, instead it is moved around the world purely to reduce big companies' tax bills.
FDI statistics aim to capture when a company expands to a new country. It is defined as an investor taking at least a 10 per cent ownership stake.
Historically it has been regarded by governments as a particularly valuable form of investment as it can increase productive capacity and lead to transfers of technology and management expertise, raising the rate of growth.
It is seen as a "sticky" form of investment that stays put even at times of stress.
Yet this vision is increasingly outdated. Much of today's FDI is accounted for by mergers rather than so-called greenfield investment in new facilities.
After the Brexit vote the amount of FDI into the UK increased to its highest level on record, but it largely reflected the purchase of London-listed South African brewer SABMiller by Belgium-based AB InBev.
The deal had almost nothing to do with the UK economy other than London's role as a destination for international listings.
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More troubling for the IMF researchers is that the FDI statistics also include the purchase of shell companies known as special purpose entities which can be used for intra-company financing or to hold intellectual property and other assets.
This "phantom FDI" plays no real economic role in the countries where it resides but allows its owners to reduce their tax liabilities by moving profits to jurisdictions with lower levels of corporate tax.
A handful of countries account for the bulk of this investment. Luxembourg and the Netherlands, both EU members, host nearly half the total, according to the IMF research.
Together with Hong Kong, the British Virgin Islands, Bermuda, Singapore, the Cayman Islands, Switzerland, Ireland and Mauritius they account for more than 85 per cent of the total global stock. "Phantom" investment is growing faster than the world economy.
It now makes up about two-fifths of the total volume of global FDI, compared with 30 per cent less than a decade ago.
Capitalists should be worried about these developments. First, the perception that globalisation allows the powerful to opt out of national law has contributed to the fraying of the rules-based trading system.
It might be tempting for companies to play hide-and-seek with the tax authorities but it has carried a long term cost.
Second, aggressive tax planning affords bigger companies an unfair advantage and tilts the playing field in a way that distorts competition.
FDI statistics are no longer fit for purpose. The IMF needs to work with other international bodies to develop new ways of measuring international capital flows, allowing for genuine investment to be reported separately from its ghostly counterpart.
It makes little sense to treat profit-shifting and building a new factory the same. Incorrect capital flow data has given a false picture of global economic imbalances.
There is increasing momentum towards tackling aggressive tax planning. The OECD is working with 129 countries, including the Netherlands and Luxembourg, to come up with a consensus solution by next year.
Economists and tax collectors alike need an accurate picture of where activity is really taking place.
Written by: The editorial board
© Financial Times