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Merchanting and current account balances

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

No 140, Globalization Institute Working Papers from Federal Reserve Bank of Dallas

Abstract: Merchanting is goods trade that does not cross the border of the firm's resident country. Merchanting grew strongly in the last decade in select small open economies and has become an important driver 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 significantly large current account surplus. To show the empirical links between merchanting and the current account, two exercises are performed in this paper. The first exercise estimates the savings impact of merchanting countries in empirical models of the medium-term current account and shows that merchanting indeed increases the current account. The second exercise shows that merchanting's impact on the country's current account is sensitive to firm mobility.

Keywords: Trade; Capital movements (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-opm
Date: 2013
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http://www.dallasfed.org/assets/documents/institute/wpapers/2013/0140.pdf (application/pdf)

Related works:
Journal Article: Merchanting and Current Account Balances (2017) Downloads
Working Paper: Merchanting and Current Account Balances (2014) Downloads
Working Paper: Merchanting and Current Account Balances (2013) Downloads
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