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332 Draining Development?5. Kar and Cartwright-Smith (2008, iii) argue that “by far the greater part of unrecordedflows are indeed illicit, violating the national criminal and civil codes, taxlaws, customs regulations, VAT assessments, exchange control requirements andbanking regulations of the countries out of which unrecorded/illicit flows occur.”6. For instance, for some transactions, the avoidance of trade taxes rather thancapital transfer may be the primary motivation.7. For an early critical assessment of this approach, see Moneta (1959).8. A more fundamental issue revolves around the fact that illicit flows throughtrade mispricing may not necessarily show up in trade invoices (for example, ifthere are unofficial agreements).9. Kar and Cartwright-Smith (2008) also apply other methods (such as the WorldBank residual model) to derive estimates of IFFs. Since one term in the computationof the World Bank residual is the current account balance, which may bedistorted downward by trade mispricing, both results are added to obtain anaggregate estimate.10. Direction of Trade Statistics (database), International Monetary Fund, Washington,DC, http://elibrary-data.imf.org/FindDataReports.aspx?d=33061&e=170921.11. Hummels and Lugovskyy (2006) note that, for New Zealand and the UnitedStates, episodes in which f.o.b. exports exceed corresponding c.i.f. imports constituteabout one-third of the IMF data.12. The data are obtained from the U.S. Merchandise Trade Databases; see USATrade Online (database), U.S. Department of Commerce, Washington, DC,https://www.usatradeonline.gov/.13. See the archive section at United States International Trade Commission, “OfficialHarmonized Tariff Schedule,” http://www.usitc.gov/tata/hts/index.htm.14. See also the discussion in Fuest and Riedel’s contribution to this volume (chapter4).15. Gopinath and Rigobon (2008) examine monthly price data for approximately20,000 imported goods and find that the (trade-weighted) median price durationin the currency of pricing is 10.6 months.16. This section draws on Berger and Nitsch (2012).17. UN Comtrade (United Nations Commodity Trade Statistics Database), StatisticsDivision, Department of Economic and Social Affairs, United Nations, NewYork, http://comtrade.un.org/db/.ReferencesABS (Australian Bureau of Statistics). 1998. “Bilateral Merchandise Trade StatisticsReconciliation: Australia and the European Union, 1992 to 1997.” InternationalMerchandise Trade, Australia 5422.0 (September): 10–21, ABS, Canberra.Baldwin, R. E. 2006. “The Euro’s Trade Effects.” ECB Working Paper 594 (March),European Central Bank, Frankfurt.