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Retained earnings, foreign portfolio ownership, and the German current account: A firm-level approach

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Listed:
  • Goldbach, Stefan
  • Harms, Philipp
  • Jochem, Axel
  • Nitsch, Volker
  • Weichenrieder, Alfons J.

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

Suggested Citation

  • Goldbach, Stefan & Harms, Philipp & Jochem, Axel & Nitsch, Volker & Weichenrieder, Alfons J., 2024. "Retained earnings, foreign portfolio ownership, and the German current account: A firm-level approach," Darmstadt Discussion Papers in Economics 246, Darmstadt University of Technology, Department of Law and Economics.
    • Handle: RePEc:zbw:darddp:298856
    DOI: 10.26083/tuprints-00027468
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    Keywords

    current account; balance of payments; corporate savings; retained earnings; foreign portfolio investment; Germany;
    All these keywords.

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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