Current account

from Wikipedia, the free encyclopedia

The current account (short LB ) into the economics all expenditures and revenues of the national economy , including the imports and exports of goods and services in the economic balance of payments .

The balance of the current account is an important economic indicator for evaluating the performance of an economy.

Current account in the system of national accounts

The balance of payments includes all economic transactions between Germany and abroad within one year. It can be roughly divided into two partial balances. On the one hand there is the capital account , which includes the capital transactions, and on the other hand the current account, which records all expenditure and income of an economy, including the imports and exports of goods . The current account can be divided into four partial balances:

Classification of the current account

If you combine the trade balance and the services balance, you get a balance. This is defined as the difference between the export and import value . It records all flows of goods and represents the so-called external contribution , which is also a component of the national product and has a direct effect on production and employment. So if the balance sheet deteriorates, a country’s production and employment also deteriorate.

In the following, both the partial balances of the current account and the implication of a current account surplus or deficit will be presented using Germany as an example.

trade balance

The largest partial balance of the current account in terms of amount in most industrialized countries is the trade balance or foreign trade balance, in which the exports and imports of tangible goods ( goods ) are recorded. The exports of goods are posted in the balance of payments on the debit side (unlike in the accounting in relation to the balance of payments also called assets or credit side), as they lead to incoming payments. Goods imports are posted on the credit side (in this context also referred to as liabilities or debts side).

According to the Deutsche Bundesbank , goods to the value of 893.6 billion euros ( FOB ) were exported in Germany in 2006 and goods to the value of 731.5 billion euros ( CIF ) were imported. The foreign trade balance was accordingly +162.2 billion euros and thus reached a high. The Bundesbank includes a correction of EUR -18.6 billion under the heading Supplements to trade in goods .

Service balance

In the services account all exports and imports are of services covered. A service import occurs when residents make use of services offered abroad (example: a haircut by a German in the Netherlands or German tourists traveling abroad would be a service import from a German perspective. Conversely, advice to a foreign company by Germans or a visit would be foreign tourists in Germany from a German perspective a service export).

Service transactions are difficult to record statistically because they are not completely subject to customs and reporting regulations, so that in some cases only estimates can be used. The import of services is posted on the credit side because it leads to expenses, the export of services on the debit side. In 2006, the German service balance was EUR -23.1 billion, after having been EUR -29.4 billion in 2004. The largest component of trade in services is travel with a negative balance of EUR -33.5 billion (2006). However, this balance was lower in 2006 than in previous years because additional income from the soccer world championship held in Germany in the summer half-year played an important role on the income side .

Earnings and property income

The Deutsche Bundesbank counts as further partial balances the additions to the trade in goods and the balance of earned income and property income ( primary income ) to the current account . Income that flows into Germany is booked on the debit side. In 2006, a positive balance of +23.0 billion euros flowed from abroad to Germany in terms of earned income and property income.

Ongoing transfers

In addition, the balance of current transfers ( transfer balance ) belongs to the current account as a partial balance , with transfers flowing to Germany being booked on the debit side. In the balance sheet for current transfers, all services that are provided without direct consideration are posted. The transfer balance records the private and public transfers made and received, such as transfers from foreign workers to their home countries, contributions to international organizations and development aid. Generally speaking, it covers the free transfer between home and abroad.

The balance of current transfers in Germany was EUR -26.8 billion in 2006, so there were more transfers outflow than in.

Current account balance

Current account balance (cumulative current account balances 1980 to 2008): green = positive, red = negative, gray = no data.
Current account balances of selected European countries (1997-2013)

The current account balance is the sum of the balances of all partial balances (trade in goods, services, additions to trade in goods, primary income, current transfers). A current account balance greater than zero is called a current account surplus, a balance smaller than zero is called a current account deficit. An overview of selected current accounts as a percentage of gross domestic product is published by the Cologne Institute for Economic Research .

Current account surplus

If there is a current account surplus, the country's net external assets increase . The value of the assets changes by the balance of the current account plus the balance of the balance of asset transfers. With a current account surplus, domestic savings are greater than domestic investment. In double-entry bookkeeping, a current account surplus is accompanied by a corresponding increase in net capital exports (increase in foreign claims ).

Since more goods are produced domestically due to the greater demand due to the current account surplus than with a balanced trade balance, a greater use of labor is likely. Because in the current account surplus, the increased foreign exchange income from exports is not reused in full for import, on the other hand there is a critical objection (for example, already by Adam Smith against mercantilism ) that apart from the employment effect, only unused foreign exchange was received.

The assessment of the net capital export associated with the balance sheet surplus is inconsistent. Some economists (such as Hans-Werner Sinn ) see it as a sign of a weak location and an outflow of capital at the expense of domestic investments, on the other hand, the increased demands on foreign countries are also seen by some economists as a sign of a strong location.

Current account deficit

A country with a negative external contribution imports more than it exports, which is tantamount to a decrease in net financial assets (i.e. a decrease in net foreign assets). A negative trade balance is seen as problematic, especially when there is a budget deficit (as in the USA ) ; one speaks in such a case of a double deficit or from the English literally twin deficits ( twin deficit ). The change in wealth is made up of the current account balance, of which the external balance is a partial balance, and the balance of capital transfers. Conversely, a negative external contribution can also be interpreted positively as an inflow of foreign capital. U. is used to make profitable investments .

A current account deficit or a consumption surplus also exists if the total domestic consumption ( absorption ) is greater than its own added value ( gross domestic product ). This can be the case , for example, through public transfers or capital imports .

Use and importance of the current account balance

Overall, the items in Germany's current account balance in 2006 add up to a current account balance of +116.6 billion euros. This revenue surplus can be used, so to speak, to finance other payment outflows that are recorded in other sub-balances of the balance of payments . In the case of asset transfers, however, a balance of EUR 0.2 billion flowed abroad from Germany. The balance of the statistically non-breakdown items was +30.0 billion euros. The Bundesbank's currency reserves at transaction values ​​decreased by 2.9 billion euros, but this is included in the balance of payments with +2.9 billion euros, since the sale of currency reserves leads to income from abroad. In addition to the current account surplus, these three items increased the surplus of incoming payments from abroad to a total of +146.3 billion euros. This financed a net amount of EUR -146.3 billion from the financial account (including changes in currency reserves). So, on balance, capital was invested abroad in one form or another. Overall, the balance of payments in a currency area is always balanced.

There are two possibilities for such an outflow of capital. On the one hand, one could assume that Germany is a bad business location and that it is therefore not worth investing further here. However, it may also be that there are other locations that offer a higher return on the capital employed (for example in emerging countries ). It is true that this is initially an outflow of capital. The associated interest payments can be used to finance future domestic consumption. This can be B. also expressed by the fact that this foreign capital income is used to shorten the working life or to finance consumption in old age.

Current account surpluses contrast with current account deficits in other countries, which means that their foreign debts are increasing. Rising external imbalances are being critically discussed as a possible cause of the financial crisis from 2007 onwards . Many Keynesian economists see the current account differences in the euro area as a key cause of the euro crisis , such as Heiner Flassbeck , Paul Krugman and Joseph Stiglitz .

External contribution

= gross domestic product
= consumption
= Investments
= Exports
= Imports
= External contribution

Use equation of the national product for an open economy:

The external balance does not correspond to the current account balance. The balance of the current account results from the external balance plus the balance of the balance of current transfers.

Re 1: Goods and services that were provided in the course of an economic period

to 2: indicates where the goods and services provided went

Exceed the exports , the imports , it is called a positive contribution . In the opposite case, one speaks of a negative external contribution . If the exports are equal to the imports, then there is a balanced external contribution . A balanced external contribution is a common definition of external balance within the framework of the magic square .


Current account using the example of Sweden

The following example is intended to show the development of Sweden's current account in the years 1995–2008.

The representation of the current account of the example country Sweden on the right edge of the picture shows that the current account has been increasing steadily from 1995 to 2005. If a current account behaves in such a way that the balance of the individual years is greater than zero, one speaks of a so-called current account surplus. This means that exports of goods and services exceeded imports in 1995-2005. It should also be mentioned that a positive balance, as it is here, inevitably means an increase in receivables from abroad. Which means that the income from trading in goods and services exceeds the related deposits. Such a surplus corresponds to a deficit of the same amount abroad.

Determinants of the current account

The current account and thus the current account balance, i.e. the sum of the partial balances of the current account, is largely determined by the balance of goods and services imports and exports. The amount of exports and imports of a country are in turn closely related to the amount of savings and investments in an economy. This relationship can be explained mathematically as follows:

Mathematical derivation

The domestic product (Y) of an economy is initially the sum of consumption (C) , investments (I) , government expenditure (G) and the balance of exports (Ex) and imports (Im) :

The balance of exports and imports is also known as net export (Nx) , as a formula:

The domestic product, reduced by consumption and government expenditure, represents economic savings (S) , i.e.:

If you put both formulas in the top equation, you get the relationship between savings and investment on the one hand and net exports or current account balance on the other:

This shows that the balance of savings and investment equals the current account balance.

Model of a small economy


Saving and investment (left) and current account balance (right) depending on the world interest rate

In order to be able to examine the effects of changes in economic savings or investment on the current account, the following analysis assumes a small, open economy with complete capital mobility . This means that, due to its size, this economy has only a very small influence on the world economy and thus on the world interest rate, that residents have free access to world financial markets and can take out and grant unlimited loans. The following applies:

= domestic interest rate
= World interest rate.

It follows that the amount of savings and investments is determined by the world interest rate. If the world interest rate is high, then the savings will be higher than the investments. If the world interest rate is low, investments will be higher than savings.

Punkt shows that when the world interest rate is low, an economy's investments are higher than its savings and a current account deficit arises. Point shows the world interest rate at which an economy's investments equal savings and the current account is balanced. Point shows that when the world interest rate is high, the investments of an economy are lower than the savings and a current account surplus arises.

The effect of various determinants

World market interest rate

As already mentioned, the decrease in the world interest rate leads to an increase in the investment. This means that the consumers of an economy consume more resources. If this consumption increases beyond the resources available from domestic production, it can only be covered by imports from the rest of the world. Due to the increased consumption of resources, only a smaller part of the domestic production is available for export, the export volume decreases with increasing import volumes, which leads to a surplus of imports over exports and thus the current account tends to lead to a deficit. Conversely, it can be said that an increase in the world interest rate reduces resource consumption, export volumes increase, imports decrease and thus the current account tends to show a surplus.

S ↓ I ↑ Ex ↓ Im ↑ or S ↑ I ↓ Ex ↑ Im ↓

Fiscal policy

What is meant here are, for example, changes in tax charges (T) . Since the consumption (C) of disposable income (YT) is dependent on the Taxes increases by reducing the available household income, and thus the consumption as well as partly also the savings increased. But above all, the reduced tax revenue reduces the state savings (TG) and thus the overall economic savings . As already mentioned in the example above, it follows that resource consumption increases over the available production and thus imports exceed exports. The current account would therefore tend to show a deficit.

(YT ↓ -C ↑) + (T ↓ -G) -I = Nx ↓

Terms of Trade

The ratio of export prices to terms of trade import prices also has a strong influence on the current account. For example, a relative improvement in export prices compared to import prices leads to an increase in the real income of an economy. Due to the improved terms of trade, the economy can import more for the same amount of exports.

Trade policy

If the government of a country decides to restrict the import of foreign goods, this initially leads to a decrease in imports and thus to an increase in net exports (Ex-Im ↓ = Nx ↑) . However, since this protectionist policy has no influence on savings or investment and thus on the current account balance (SI = Nx) , net exports must return to the same level as before. This can be explained by the increase in real exchange rates and the associated relative increase in the price of domestic products. As a result of the relative change in the price of domestic versus foreign products, domestic exports will decline and thus compensate for the increase in net exports caused by the protection policy (Ex ↓ -Im = Nx ↓) . Ultimately, the economy will not only import less, but also export less. Due to the increase in the real exchange rate, net economic exports will assume the same level as before, with the trade volume (Ex + Im) decreasing , which ultimately results in a reduction in welfare gains. The improvement in the current account which was hoped for through the protection policy will not be achieved, since both savings and investment remain unaffected.

Transfer to a large economy

In contrast to the small economy, the interest rate in the large economy is not dictated by the world interest rate. Rather , the interest rate can be influenced by economic policy measures such as fiscal policy . Nevertheless, the model of the small economy can also be transferred to a large economy, since here too the interest rate affects both investment demand and savings in the economy. From this it can be concluded that economic policy measures that have an effect on the interest rate also have an effect on the investments or savings of an economy and ultimately influence the balance of the current account.

See also

Individual evidence

  1. ^ Willms, M. (1995): International Monetary Policy, 2nd Edition, Munich
  2. Jarchow, H.-J., Rühmann, P. (2000): Monetary Foreign Trade - I. Monetary Foreign Trade Theory, 5th Edition, Göttingen
  3. ^ Rose, K., Sauernheimer, K. (2006): Theory of foreign trade, 14th edition, Munich
  4. , accessed on December 4, 2018
  5. Olivier Blanchard , Gerhard Illing: Macroeconomics, Pearson Deutschland GmbH, 2009, p. 580
  6. Gustav Dieckheuer: International Economic Relations, Oldenbourg Wissenschaftsverlag, 2001, page 346
  7. Gustav A. Horn and Fabian Lindner: No capital outflow from Germany (PDF; 273 kB), IMK Policy Brief, May 2011, p. 17
  8. cf. for discussion on the topic: Hans-Werner Sinn: "Rescuing Europe.", CESifo Forum Special Issue 2010, p. 17 ; Gustav Horn and Fabian Lindner: The fairy tale about the German capital outflow ( Memento from May 25, 2011 in the Internet Archive ), Financial Times Germany, May 23, 2011
  9. cf. Michael Heine, Hansjörg Herr: Economics - Management Knowledge for Study and Practice, Oldenbourg Wissenschaftsverlag, 2002, p. 603
  10. Wolfgang Münchau, "Kernschmelze im Finanzsystem", Carl Hanser Verlag , Munich, 2008, p. 155ff .; see. Benedikt Fehr : "' Bretton Woods II is dead. Long live Bretton Woods III'" in FAZ May 12, 2009, p. 32. "Bretton Woods II is dead. Long live Bretton Woods III" FAZ.Net , Stephanie Schoenwald: " Global imbalances. Are you (partly) responsible for the financial market crisis? ”KfW (Kreditanstalt für Wiederaufbau) Research. MacroScope. No. 29, February 2009. p. 1.
    On the external imbalances as “macroeconomic breeding ground” for the crisis, see also Deutsche Bundesbank: Financial Stability Report 2009, Frankfurt am Main, November 2009 ( Memento of the original from March 7, 2012 in the Internet Archive )
    Info: Der Archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. (PDF)., Gustav Horn, Heike Joebges, Rudolf Zwiener: “From the Financial Crisis to the World Economic Crisis (II), Global Imbalances: Cause of the Crisis and Solution Strategies for Germany” IMK-Report No. 40, August 2009, p. 6 f. (PDF; 260 kB) @1@ 2Template: Webachiv / IABot /
  11. Heiner Flassbeck: Ways out of the euro crisis. YouTube
  12. Paul Krugman Blog: Germans and Aliens, available online at
  13. Joseph Stiglitz: Is Mercantilism Doomed to Fail ?, Available online at


  • Paul R. Krugman, Maurice Obstfeld, Internationale Wirtschaft , 7th updated edition, Pearson Studium, Munich, 2006
  • Jeffrey D. Sachs, Felipe Larrain B., Macroeconomics , R. Oldenbourg Verlag GmbH, Munich, 1995
  • N.Gregory Mankiw, Macroeconomics , 3rd revised and expanded edition, Schäffer-Poeschel Verlag, Stuttgart, 1998

Web links