On the economic relevance of foreign direct investment and their role for the German current account balance

The German current account surplus grew markedly over the last 15 years in relation to GDP, most recently reaching historically and internationally extraordinary levels. Apart from a large trade surplus, which has been the focus of numerous studies already, the surplus in primary income (net earnings and investment income) contributes significantly to the current account balance in accounting terms. With 40 billion euro net direct investment income constitutes the major part of net primary income. Against this backdrop, the research project analyses German foreign direct investment (FDI) from two different perspectives: on the one hand, FDI flows and return differentials as driving factor are analyzed from a macroeconomic perspective and, on the one hand, the effects of FDI on value added, employment and innovation in the receiving countries are estimated based on microeconomic data.