Template-type: ReDIF-Paper 1.0
Author-Name: Elisabeth Beusch
Author-Name-First: Elisabeth
Author-Name-Last: Beusch
Author-Name: Dr. Barbara Döbeli
Author-Name-First: Barbara
Author-Name-Last: Döbeli
Author-Name: Andreas M. Fischer
Author-Name-First: Andreas M.
Author-Name-Last: Fischer
Author-Person: pfi23
Author-Name: Dr. Pinar Yesin
Author-Name-First: Pinar
Author-Name-Last: Yesin
Author-Person: pye16
Title: Merchanting and Current Account Balances
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 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.
Length: 43 pages
Creation-Date: 2013
Contact-Email: forschung@snb.ch
File-URL: https://www.snb.ch/en/publications/research/working-papers/2013/working_paper_2013_06
File-Format: text/html
Number: 2013-06
Classification-JEL: F10, F20, F32
Keywords: Merchanting, industry dynamics, current account adjustment
Handle: RePEc:snb:snbwpa:2013-06