International Financial Management (FIN 445): Germany's Economy & BOP

This report provides a comprehensive analysis of Germany's international financial management, focusing on its economy, trade patterns, and balance of payments (BOP). It highlights Germany's economic strengths, such as its skilled labor force and low corruption levels, and discusses issues and regulations affecting international business. The report examines Germany's major trade partners, its current BOP with surpluses and deficits on major accounts, and the total amount of foreign reserves. It also covers the current exchange rate between the Euro and the U.S. dollar, its movement over the past two years, and short-term and long-term predictions. The analysis uses data from sources like OECD and Knoema to provide an overview of Germany's financial landscape. Desklib offers a variety of resources and solved assignments for students.

Running head: INTERNATIONAL FINANCIAL MANAGEMENT 1
International Financial Management (FIN 445)
Student’s Name
Institutional Affiliation

INTERNATIONAL FINANCIAL MANAGEMENT 2
Country-Specific Information and Important Facts About Germany
Germany is a country in Western Europe which has 16 constituent states and
covers 357,021 kilometers square (OECD, 2017). Most of the climate evident in
Germany is temperate seasonal climate which means that Germany experiences four
seasons, that is, summer, autumn, winter and spring unlike other nations which
experience extreme tropics temperatures, thus being able to realize only two seasons, that
is, summer and winter. Germany is a member of the European Union (EU) and thus the
country is able to engage in free trade among member states which helps them get the
goods that they do not possess that other member states have. Its capital city is Berlin
with other major cities including Frankfurt and Stuttgart.
Economy of Germany
Germany may be considered to have a social market economy where most of its
labor force is highly skilled, there are low or zero levels of corruption, its capital stock is
large and innovation are all attributes that can be used to describe the economy of
Germany. Germany can be said to be the world's third-largest exporter with the world's
fourth largest by nominal GDP and the world's fifth largest by purchasing power parity
(PPP). Ideally, the service sector, mostly technology, is seen to contribute 71% to its
GDP, and the agricultural sector contributes only 1% to its GDP (OECD, 2017).
Ultimately, the country is seen to have the lowest unemployment rate of 4.7% with the
automotive industry in Germany is one of the most competitive and innovative
worldwide as it provides more employment opportunities than any other industry.
Issues and Regulations Related to International Business
When engaging in international business, Germany is faced with various issues
and regulations. These issues relate to the use of quotas and tariffs by other states, and

INTERNATIONAL FINANCIAL MANAGEMENT 3
some products produced in Germany cannot be sold in other states which makes it hard
for Germany to engage in trade with those states (OECD, 2017).
Major Trade Patterns of Germany
Germany is considered to be the world's third-largest exporter. According to a
report made by the OECD in 2016, the country exports amounted to $3.04 trillion while
its imports were $2.54 trillion (OECD, 2017). This shows that in that year, the exports
were greater than the imports of the business and therefore if a balance of payments
(BOP) was to be calculated for 2016, Germany would have a positive balance of
payments of $0.5 trillion. Apparently, in 2016, the top major exports of Germany were
cars ($164B), vehicle parts ($80.7B), medicaments ($55.5B) and planes ($36.7B) while
its top imports were unspecified ($96.3B), vehicles ($60.7B), spare parts ($43.4B) and
computers ($29B).
The Current Balance of Payments (BOP) of Germany and A Discussion of Its
Surpluses or Deficits on Major Accounts
Balan
ce
2009 2010 2011 2012 2013 2014 2015 2016
Net
financ
ial
accou
nt
184,466
M
123,76
7M
167,71
8M
194,235
M
299,979
M
316,271
M
259,58
1M
269,080
M
Net
capital
accou
nt
-
2,595M
1,617
M
602M -609M -824M 3,233M -668M 1,257M
Net - - - - 48,397 24,851 - -

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errors
and
omissi
ons
11,811
M
70,883
M
61,550
M
54,075
M
M M 27,902
M
19,019
M
Reser
ves
and
relate
d
12,356
M
2,132
M
3,914
M
1,699M 1,158M -
3,295M
-
2,423
M
1,898M
Net
curren
t
accou
nt
297.5M 301.1
M
291M 252.5M 248.9M 229.7M 192.3
M
155.2M
Sum
of
total
182,713
.5M
56,934
.1M
110,97
5M
141,502
.5M
348,958
.9M
341,289
.7M
228,78
0. 3M
253,371
.2M
From the analysis of the Balance of Payments (BOP) of Germany above, it is
evident that the BOP of the country has been fluctuating (Knoema, 2018d). Ideally, the
analysis above shows that 2013 was the year with the highest BOP for Germany since the
country realized a BOP of $348,958.9 million while 2010 was the year with the lowest
BOP for Germany as the nation achieved a BOP of $56,934.1 million in that year
(Knoema, 2018a).
The Total Amount of Foreign Reserve of Germany
In total, Germany realizes a total amount of foreign exchange reserves of 166,970
EUR million in April this year which was an increase from 164,831 million in March this
year. In average since 1998 to 2018, the foreign exchange reserves of Germany amounted

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to 123,723.50 EUR million with September 2012 having the highest foreign exchange
reserves of 203,337 EUR million and December 2004 recording the lowest of 71,335
EUR million (Tradingeconomics, 2018).
The Current Exchange Rate between Euro and the U.S. dollar
The current exchange rate between the Euro and the U.S. dollar is one U.S. dollar
is equal to 0.86 Euros (1US$=0.86£) (Knoema, 2018b).
The Exchange Rate Movement in the Past 2 Years
In the past two years, the exchange rate between the Euro and the U.S. dollar has
been fluctuating (Knoema, 2018c). However, the exchange rate was high in 2017 which
started to decline towards 2018.
A Prediction of the Exchange Rate Movement (Short-term and Long-term)
In the short-term, the exchange rate is expected to continue fluctuating while in
the long-term, the exchange rate will continue declining (Knoema (2018e).

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References
OECD (2017). The Trade Patterns of Germany. OECD. [Online]. Available at
https://atlas.media.mit.edu/en/profile/country/deu/ [Accessed on 31st May 2018].
Knoema (2018a). Germany: Net Current Account. Knoema. [Online]. Available at
ttps://knoema.com/search?
query=current+account&pageIndex=&scope=&term=&correct=&source=Header/
[Accessed on 31st May 2018].
Knoema (2018b). Germany: Net Capital Account. Knoema. [Online]. Available at
ttps://knoema.com/search?
query=capital+account&pageIndex=&scope=&term=&correct=&source=Header
[Accessed on 31st May 2018].
Knoema (2018c). Germany: Net Financial Account. Knoema. [Online]. Available at
ttps://knoema.com/search?
query=financial+account&pageIndex=&scope=&term=&correct=&source=Heade
r [Accessed on 31st May 2018].
Knoema (2018d). Germany: Net Errors and Omissions. Knoema. [Online]. Available at
ttps://knoema.com/search?
query=errors+and+omissions&pageIndex=&scope=&term=&correct=&source=H
eader [Accessed on 31st May 2018].
Knoema (2018e). Germany: Net Reserves. Knoema. [Online]. Available at
ttps://knoema.com/search?
query=net+reserves&pageIndex=&scope=&term=&correct=&source=Header
[Accessed on 31st May 2018].

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Tradingeconomics (2018). Foreign Exchange Reserves. Trading Economics. [Online].
Available at https://tradingeconomics.com/germany/foreign-exchange-reserves
[Accessed on 31st May 2018].