Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
We analyze the differences between bilateral FDI and trade data reported by the US and by China for the period from 1983 to 2017. Such differences can be interpreted as hidden capital flows. We show that they are economically significant and analyze their dynamics using VAR and ARDL models. We find that hidden capital flows occur in both directions: from China to the US through the trade channel and from the US to China through the FDI channel. Only the latter respond to financial market conditions. In the long run, an increase in hidden capital outflows through the trade channel triggers a hidden capital inflow through the FDI channel.