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Merchanting and Current Account Balances
Author(s) -
Beusch Elisabeth,
Döbeli Barbara,
Fischer Andreas M.,
Yeşin Pinar
Publication year - 2017
Publication title -
the world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/twec.12355
Subject(s) - current account , economics , balance (ability) , earnings , international economics , investment (military) , balance of payments , sample (material) , residence , balance of trade , current (fluid) , monetary economics , macroeconomics , demographic economics , finance , exchange rate , political science , medicine , chemistry , chromatography , politics , law , physical medicine and rehabilitation , electrical engineering , engineering
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 European economies and has become an important determinant 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 paper examines the empirical linkages between merchanting and the current account balance. Using a sample of 53 countries during 1980–2011, it shows that merchanting activity is a determinant of the medium‐term current account balance.