Merchanting and Current Account Balances

June 12, 2013
Issue 2013-06

Summary

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.

Download file now

The file can be downloaded with the button below.

Issue:
06
Pages:
43
JEL classification:
F10, F20, F32
Keywords:
Merchanting, industry dynamics, current account adjustment
Year:
2013

Additional files

Related content

Author(s)

  • Elisabeth Beusch

  • Dr. Barbara Döbeli

  • Andreas M. Fischer

  • Dr. Pinar Yesin

Your settings

Required: These cookies (e.g. for storing your IP address) cannot be rejected as they are necessary to ensure the operation of the website. These data are not evaluated further.
Analytics: If you consent to this category, data such as IP address, location, device information, browser version and site visitor behaviour will be collected. These data are evaluated for the SNB's internal purposes and are kept for two years.
Third-party: If you consent to this category, third-party services (used, for example, to add social multimedia content to the SNB's website) will be activated which collect personal data, process these data, disclose them abroad - worldwide - and place cookies. The relevant data protection regulations are linked in the 'Privacy statement for the website of the Swiss National Bank'.

Choose your preferred settings:

This website uses cookies, analytics tools and other technologies to provide requested features, content and services, to personalise the content shown, to provide links to social media, and to analyse the use of the website in anonymised form for the purposes of improving usability. Personal data are also disclosed abroad - worldwide - to video service providers and the analytics tools of these providers are used. More information is available under 'Manage settings'.