Merchanting and Current Account Balances
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 small open economies, particularly in Finland, Ireland, Sweden, and Switzerland, 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 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 and shows that the presence of merchanting activity in a country indeed increases its current account balance by 3% on average. The second exercise shows that merchanting's impact on the country's current account is sensitive to firm mobility.
|Date of creation:||2013|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +41 44 631 31 11
Fax: +41 44 631 39 11
Web page: http://www.snb.ch/en/ifor/research/Email:
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Rudolfs Bems & Robert C. Johnson, 2012. "Value-Added Exchange Rates," NBER Working Papers 18498, National Bureau of Economic Research, Inc.
- Cherif, Reda & Hasanov, Fuad, 2013.
"Oil Exporters’ Dilemma: How Much to Save and How Much to Invest,"
Elsevier, vol. 52(C), pages 120-131.
- Reda Cherif & Fuad Hasanov, 2012. "Oil Exporters' Dilemma; How Much to Save and How Much to Invest," IMF Working Papers 12/4, International Monetary Fund.
- Bems, Rudolfs & de Carvalho Filho, Irineu, 2011.
"The current account and precautionary savings for exporters of exhaustible resources,"
Journal of International Economics,
Elsevier, vol. 84(1), pages 48-64, May.
- Rudolfs Bems & Irineu E. Carvalho Filho, 2009. "Current Account and Precautionary Savings for Exporters of Exhaustible Resources," IMF Working Papers 09/33, International Monetary Fund.
- William R. Cline & John Williamson, 2011. "Estimates of Fundamental Equilibrium Exchange Rates, May 2011," Policy Briefs PB11-5, Peterson Institute for International Economics.
- Menzie D. Chinn & Eswar S. Prasad, 2000.
"Medium-Term Determinants of Current Accounts in Industrial and Developing Countries: An Empirical Exploration,"
NBER Working Papers
7581, National Bureau of Economic Research, Inc.
- Chinn, Menzie D. & Prasad, Eswar S., 2003. "Medium-term determinants of current accounts in industrial and developing countries: an empirical exploration," Journal of International Economics, Elsevier, vol. 59(1), pages 47-76, January.
- Menzie David Chinn & Eswar Prasad, 2000. "Medium-Term Determinants of Current Accounts in Industrial and Developing Countries; An Empirical Exploration," IMF Working Papers 00/46, International Monetary Fund.
- Jaewoo Lee & Jonathan David Ostry & Alessandro Prati & Luca Antonio Ricci & Gian-Maria Milesi-Ferretti, 2008. "Exchange Rate Assessments; CGER Methodologies," IMF Occasional Papers 261, International Monetary Fund.
- Leland Crane & Meredith Crowley & Saad Quayyum, 2007. "Understanding the evolution of trade deficits: trade elasticities of industrialized countries," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q IV, pages 2-17.
- Menzie D. Chinn & Hiro Ito, 2008. "Global Current Account Imbalances: American Fiscal Policy versus East Asian Savings," Review of International Economics, Wiley Blackwell, vol. 16(3), pages 479-498, 08.
- Robert C. Johnson & Guillermo Noguera, 2012. "Fragmentation and Trade in Value Added over Four Decades," NBER Working Papers 18186, National Bureau of Economic Research, Inc.
- Joshua Aizenman, 2007.
"Large Hoarding of International Reserves and the Emerging Global Economic Architecture,"
NBER Working Papers
13277, National Bureau of Economic Research, Inc.
- Joshua Aizenman, 2008. "Large Hoarding Of International Reserves And The Emerging Global Economic Architecture," Manchester School, University of Manchester, vol. 76(5), pages 487-503, 09.
- Gruber, Joseph W. & Kamin, Steven B., 2007. "Explaining the global pattern of current account imbalances," Journal of International Money and Finance, Elsevier, vol. 26(4), pages 500-522, June.
When requesting a correction, please mention this item's handle: RePEc:snb:snbwpa:2013-06. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Enzo Rossi)
If references are entirely missing, you can add them using this form.