Retained earnings and foreign portfolio ownership: Implications for the current account debate

Stefan Goldbach, Philipp Harms, Axel Jochem, Volker Nitsch and Alfons Weichenrieder

No 389, SAFE Working Paper Series from Leibniz Institute for Financial Research SAFE

Abstract: In some countries, a sizable fraction of savings is derived from corporate savings. Although larger, traded corporations are often co-owned by foreign portfolio investors, current international accounting standards allocate all corporate savings to the host country. This paper suggests a framework to correct for this misleading attribution and applies this concept to Germany. For the years 2012 to 2020, our corrections retrospectively reduce German savings and consequently the German current account surplus by, on average, €11.5bn annually. This amounts to approximately five percent of Germany's average official current account surplus (€226.6bn) across these years.

Keywords: current account; balance of payments; corporate savings; retained earnings; foreign portfolio investment; Germany (search for similar items in EconPapers)
JEL-codes: E21 F32 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-acc
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Working Paper: Retained Earnings and Foreign Portfolio Ownership: Implications for the Current Account Debate (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:safewp:389

DOI: 10.2139/ssrn.4465838

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