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Merchanting and Current Account Balances

Elisabeth Beusch, Barbara Döbeli, Andreas Fischer () and Pinar Yesin ()

No 9990, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Merchanting is goods trade that does not cross the border of the firm's country of residence. Merchanting grew strongly in the last decade in several European economies and has become an important determinant of these countries' current account. Because merchanting firms reinvest their earnings abroad to expand their international activities, this practice raises national savings in the home country without increasing domestic investment. This results in a larger current account surplus. To show the empirical links between merchanting and the current account balance, two exercises are performed in this paper using a sample of 53 countries during 1980-2011. The first exercise estimates the savings impact of merchanting countries in empirical models of the medium-term current account. The second exercise shows that merchanting's impact on the country's current account is sensitive to firm mobility.

Keywords: current account adjustment; industry dynamics; Merchanting (search for similar items in EconPapers)
JEL-codes: F10 F20 F32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-acc and nep-opm
Date: 2014-05
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Journal Article: Merchanting and Current Account Balances (2017) Downloads
Working Paper: Merchanting and current account balances (2013) Downloads
Working Paper: Merchanting and Current Account Balances (2013) Downloads
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