The corporate sector and the current account

Abstract

We analyze how the corporate sector’s financing position affects national current account balances in a macroeconomic panel analysis for sample of 25 countries for the period 1980–2015. A consistent finding is that an increase (decrease) in corporate net lending is associated with a higher (lower) current account. We disentangle the current account effects of corporate saving and investment and conduct a number of robustness checks. We show that corporate saving and top household income shares are inversely related in our sample and that they have opposite effects on the current account. We conclude that corporate sector saving has contributed considerably to global current account imbalances.