Retained earnings and foreign portfolio ownership: implications for the current account debate

  • 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 approximately five percent of Germany’s average official current account surplus (€226.6bn) across these years.

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Author:Stefan GoldbachGND, Philipp HarmsORCiDGND, Axel JochemORCiDGND, Volker NitschORCiDGND, Alfons J. WeichenriederORCiDGND
Series (Serial Number):SAFE working paper (389)
Place of publication:Frankfurt am Main
Document Type:Working Paper
Year of Completion:2023
Year of first Publication:2023
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2023/06/09
Tag:Germany; balance of payments; corporate savings; current account; foreign portfolio investment; retained earnings
Edition:08 May 2023
Page Number:23
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF)
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
JEL-Classification:E Macroeconomics and Monetary Economics / E2 Macroeconomics: Consumption, Saving, Production, Employment, and Investment / E21 Consumption; Saving; Wealth
F International Economics / F3 International Finance / F32 Current Account Adjustment; Short-Term Capital Movements
Licence (German):License LogoDeutsches Urheberrecht