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Do capital goods account for the huge German export lead over France? | 20 comments (20 topical, editorial, 0 hidden)
Balance of payments (none / 0)
To compare the two economies, you need to take into account the overall balance of payments.

To simplify, the Germans sell their Mercedeses to the world and then come and spend their money in the French countryside. Tourism is obviously a much bigger bit of the economy in France.

I could not find the numbers right away, but France has a slight surplus of its capital accounts balance, while Germany actually has a deficit - which simply reflects slightly different structures.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Tue Jan 23rd, 2007 at 04:02:31 AM EST
[ Parent ]
Re: Balance of payments (none / 0)
France has a slight surplus of its capital accounts balance, while Germany actually has a deficit

So "External balance of goods and services" (Germany: 7.7% of GDP ; France: -2.1% of GDP [for 2006-Q3]) is a totally different beast than "capital accounts balance"?

(I am in dire need of taking Econ 101.)

Truth unfolds in time through a communal process.

by marco on Tue Jan 23rd, 2007 at 04:24:50 AM EST
[ Parent ]
This is a good start (none / 0)
http://en.wikipedia.org/wiki/Balance_of_payments

The number that matters is the change in reserves

Current Account + Capital Account = Change in Official Reserve Account

with Capital account =

Increase in foreign ownership of domestic assets - Increase of domestic ownership of foreign assets

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Tue Jan 23rd, 2007 at 04:57:51 AM EST
[ Parent ]
Re: This is a good start (none / 0)
Thanks, Jerome.

Unfortunately, I think I must still be missing something.

On the map on that page, France appears red ("countries in current account deficit, 2005"), while Germany is in blue ("countries in current account surplus").

And on the List of countries and territories by current account balance list referenced at the bottom of that page, the estimate for Germany's 2005 current account balance is $115,500 million, while France's is -$38,780 million.

A negative current account balance means a negative change in official reserve account, doesn't it?  Otherwise, maybe the Wikipedia estimates are totally off?

Truth unfolds in time through a communal process.

by marco on Tue Jan 23rd, 2007 at 05:18:45 AM EST
[ Parent ]
Re: This is a good start (none / 0)
No, the change in reserves comes from the addition of the current account balance (the one you've been looking at) and the capital account (or financial account) balance, i.e. the balance of investments, whether as sales/purchases of shares, bonds or investments in factories/material assets.

Germany has a large negative capital account balance because they invest a lot more outside of Germany than foreigners invest in Germany. France is the other way round, most years.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Tue Jan 23rd, 2007 at 06:07:27 AM EST
[ Parent ]
Re: This is a good start (none / 0)
Thanks.  I think I am starting to understand.  But I also see I have a hell of a lot to learn.

I encourage you to go shopping more.
by marco on Wed Jan 24th, 2007 at 04:21:05 AM EST
[ Parent ]

Do capital goods account for the huge German export lead over France? | 20 comments (20 topical, 0 editorial, 0 hidden)
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