Long-Term Trends in the Saving-Investment Balance and Persistent Current Account Surpluses in a Small Open Economy: The Case of the Netherlands

IMF Working Papers, May 1, 1996

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Long-Term Trends in the Saving-Investment Balance and Persistent Current Account Surpluses in a Small Open Economy: The Case of the Netherlands

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Bibliographic details

• Authors: Ioannis Halikias
• Published: May 1, 1996
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451975772.001

Overview

• Paper explores, from an investment-saving perspective, factors underlying the persistent widening of the current account surplus in the Netherlands since the early 1980s.
• Standard intertemporal models, even when extended to incorporate specific Dutch features, do not fully account for the observed widening.
• The paper therefore focuses on the production side of the economy to gain further insight into trends in the current account.

Main empirical findings

• Empirical evidence suggests that the bulk of the observed widening of the current account surplus is accounted for by:
  • changes in relative factor prices, and
  • a relative demand shift toward non-tradable goods.
• The impact of these factors on the current account appears to reflect:
  • changes in factor proportions, and
  • deviations from perfect competition in the Dutch sheltered sector.

Analytical approach and scope

• Perspective: investment-saving (saving-investment) balance.
• Comparison: standard intertemporal models versus production-side analysis.
• Emphasis on production-side mechanisms when intertemporal models are insufficient to explain persistent surplus widening.

Subjects and keywords (as listed in the source)

• Subject: Balance of payments, Current account, Current account surpluses, Labor, Production, Real wages, Total factor productivity, Wages
• Keywords: Current account, Current account surpluses, Global, investment-saving ratio, Netherlands saving, perfect competition, persistent current, Real wages, saving rate, saving-investment balance, saving-investment ratio, Total factor productivity, WP