Financial account

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The capital account (also capital account balance) is a partial balance of the balance of payments . It records capital movements between a country and the rest of the world, but can also be set up for groups of countries. The capital account is the counterpart to the current account , in which the flow of goods is recorded. The balance of the financial account corresponds to the balance of the current account, but has the opposite sign.

Main categories of the financial account

  • Direct investments are cross-border company investments (shares, equity stakes, long-term loans) of 10% or more of the capital, short-term financial relationships, reinvested profits and loan funds provided by the owners. In addition, the cross-border acquisition and sale of real estate also counts as direct investments.
  • Securities investments are investments in long-term debt securities and in equity securities , provided they do not fall under direct investment. Money market funds and money market papers are also included.
  • Financial derivatives fall under the heading of securitized and unsecuritized options and financial futures. Since 1999, this position has been reported separately from securities investments because the products involved are products that can be traded on non-organized markets.
  • Credit transactions are the name given to many different financial actions outside of securities investments and direct investments (e.g. short and long-term financial relationships of domestic companies).
  • Other investments (e.g. development aid loans)

Systematics

The financial account contains all capital transactions. A distinction is made between investments made by residents abroad (foreign assets) and investments made by foreigners in Germany (foreign liabilities).

Capital exports are understood to mean increases in receivables from foreigners and decreases in liabilities to foreigners and appear as a negative position in the financial account.

Capital imports, in turn, are all decreases in receivables from foreigners and increases in liabilities to foreigners and represent a positive position in the financial account.

It is important to ensure that all capital transactions are listed in the correct sub-category of the financial account. A distinction must also be made between short-term and long-term capital movements.

Inclusion in the balance of payments

Balance of payments
  • Current account
  • Financial account
    • Domestic net investments abroad
      • Direct investment
      • Securities investments
      • Loans (and other investments)
    • Foreign net investments in Germany
      • Direct investment
      • Securities investments
      • Loans (and other investments)
  • Foreign exchange balance (change in foreign currency reserves)
  • Adjustment items and transactions not recorded statistically

Formally, the balance of payments is always balanced as all transactions are booked twice. Purchases and sales of goods and assets are "paid for" by means of short or long-term loans. An offsetting entry is made in the financial account or a cash payment is made via the foreign exchange market . This change in currency reserves is shown in the foreign exchange balance sheet.

In some textbooks, a distinction is made between the capital account in the broader sense and the capital account in the narrower sense (including capital account ). Here, the capital account in the narrower sense forms the capital account in the broader sense with the foreign exchange balance.

A negative sign in the financial account means that more capital has been transferred abroad from residents. This situation describes a net capital export (capital account deficit), claims against foreigners have increased.

If, on the other hand, there is a positive sign in the capital account, more capital has been paid into the country by foreigners. This describes the fact of a net capital import (financial account surplus), the liabilities to foreigners have increased.

Examples

  • (a) A German exporter delivers apples to Bulgaria for € 4 million on the basis of a 90-day credit (i.e. the Bulgarian importer enters into a liability of € 4 million)
  • (b) A German receives a dividend payment from a factory he owns abroad in the amount of € 2 million, which he uses again to reinvest in this factory.
  • (c) A German importer buys washing machines from an American manufacturer for € 15 million and pays for this purchase with the help of a loan from an American bank that finances this business.
a b c all in all
Current account −9
trade balance −11
Exports +4 +4
Imports −15 −15
Service balance
interest
Dividends +2 +2
Financial account +9
Net foreign investment −2 −2
Net credit short term −4 +15 +11
Net long term loans
Balance of payments 0

According to the International Monetary Fund , the largest capital exporters in 2006 on balance (capital exports minus imports) were China, Japan, Germany and Russia, with shares of all net capital exports in the world of 13.5%, 12.2%, 8.8% and also 8.8%.

By far the largest net capital importer in 2006 was the USA with 63.7%, followed by Spain 7.4%, Great Britain 4.1% and Australia with 3.0% of the world's net imports.

literature

  • Dieter Brümmerhoff : National accounts. 7th edition. Oldenbourg Verlag, 2002, ISBN 3-486-25948-2 .
  • Olivier Blanchard: Macroeconomics. 3. Edition. International Edition.
  • Jeffrey D. Sachs, Felipe Larrain Bascunan: Macroeconomics from a global perspective . Oldenbourg Verlag, Munich / Vienna 1995, ISBN 3-486-22709-2 .
  • Heinz-Peter Spahn: Macroeconomics . 2nd Edition. Springer, 1998.

Individual evidence

  1. ↑ Heinz-Peter Spahn: Macroeconomics . 2nd Edition. Springer, 1998.
  2. ^ Spahn: Macroeconomics . 2nd Edition. Jumper.
  3. ↑ Jeffrey D. Sachs, Felipe Larrain B .: Macroeconomics in a global perspective . Oldenbourg Verlag, Munich / Vienna 1995, p. 240.
  4. ^ Statistical appendix . (PDF; 1.29 MB) p. 141 (English).