Retained Earnings, Foreign Portfolio Ownership, and the German Current Account: A Firm-Level Approach

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

German Economic Review, 2024, vol. 25, issue 2, 127-145

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 2012–2020, our corrections retrospectively reduce German savings and consequently the German current account surplus by, on average, €11.5 bn annually. This amounts to lowering Germany’s average official current account surplus (€226.6 bn) across these years by approximately five percent.

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: 2024
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Related works:
Working Paper: Retained earnings, foreign portfolio ownership, and the German current account: A firm-level approach (2024)
Working Paper: Retained earnings, foreign portfolio ownership, and the German current account: A firm-level approach (2024)
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DOI: 10.1515/ger-2023-0065

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