Template-type: ReDIF-Paper 1.0
Author-Name: Andreas M. Fischer
Author-Name-First: Andreas M.
Author-Name-Last: Fischer
Author-Person: pfi23
Author-Name: Henrike Groeger
Author-Name-First: Henrike
Author-Name-Last: Groeger
Author-Name: Philip U. Sauré
Author-Name-First: Philip U.
Author-Name-Last: Sauré
Author-Person: psa635
Author-Name: Dr. Pinar Yesin
Author-Name-First: Pinar
Author-Name-Last: Yesin
Author-Person: pye16
Title: Current account adjustment and retained earnings
Abstract: This paper develops a formal strategy to calculate current accounts with retained earnings (RE) on equity investment and analyzes their adjustment during the global financial crisis. RE are the part of companies' profits which are reinvested and not distributed to shareholders as dividends. International statistical standards treat RE on foreign direct investment and RE on portfolio investment differently: while the former enter the current and financial account, the latter do not. We show that this differential treatment strongly affects current accounts of several advanced economies, frequently referred to as financial centers, with large positions in equity (portfolio) investment. Our empirical analysis finds that the differential treatment of RE alters the interpretation of current account adjustment for the global financial crisis.
Length: 62 pages
Creation-Date: 2018
Contact-Email: forschung@snb.ch
File-URL: https://www.snb.ch/en/publications/research/working-papers/2018/working_paper_2018_12
File-Format: text/html
Number: 2018-12
Classification-JEL: F32, F47, G11
Keywords: Current account adjustment, financial centers, retained earnings, equity investment
Handle: RePEc:snb:snbwpa:2018-12