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Merchanting and current account balances


  • Elisabeth Beusch
  • Barbara Döbeli
  • Andreas M. Fischer
  • Pinar Yesin


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.

Suggested Citation

  • Elisabeth Beusch & Barbara Döbeli & Andreas M. Fischer & Pinar Yesin, 2013. "Merchanting and current account balances," Globalization and Monetary Policy Institute Working Paper 140, Federal Reserve Bank of Dallas.
  • Handle: RePEc:fip:feddgw:140

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    Cited by:

    1. Philip Sauré, 2015. "The Resilient Trade Surplus, the Pharmaceutical Sector, and Exchange Rate Assessments in Switzerland," Working Paper Series WP15-11, Peterson Institute for International Economics.
    2. Pinar Yesin, 2016. "Exchange Rate Predictability and State-of-the-Art Models," Working Papers 16.03, Swiss National Bank, Study Center Gerzensee.
    3. Joseph E. Gagnon, 2014. "Alternatives to Currency Manipulation: What Switzerland, Singapore, and Hong Kong Can Do," Policy Briefs PB14-17, Peterson Institute for International Economics.
    4. International Monetary Fund, 2017. "Ireland; Selected Issues," IMF Staff Country Reports 17/172, International Monetary Fund.
    5. Sharon Tennyson, 2010. "Incentive Effects of Community Rating in Insurance Markets: Evidence from Massachusetts Automobile Insurance," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 35(1), pages 19-46, June.
    6. Bürgi Bonanomi, Elisabeth & Elsig, Manfred & Espa, Ilaria, 2015. "The Commodity Sector and Related Governance Challenges from a Sustainable Development Perspective: The Example of Switzerland Current Research Gaps," Papers 865, World Trade Institute.

    More about this item


    Trade ; Capital movements;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

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