What drives the German current account? And how does it affect other EU Member States?

Konferenzbeitrag

We estimate a three-country model using 1995 2013 data for Germany, the Rest of the Euro Area (REA) and the Rest of the World (ROW) to analyse the determinants of Germany s current account (CA) surplus after the launch of the euro. Our results suggest that the German surplus reflects a succession of distinct shocks. Mono-causal explanations of the surplus are thus insufficient. The most important factors driving the German surplus were positive shocks to the German saving rate and to ROW demand for German exports, as well as German labour market reforms and other positive German aggregate supply shocks. The key shocks that drove the rise in the German CA tended to worsen the REA trade balance, but had a weak effect on REA real activity. Our analysis suggests these driving factors are likely to be slowly eroded, leading to a very gradual reduction of the German CA surplus. An expansion in German government consumption and investment would raise German GDP and reduce the CA surplus, but the effects on the surplus would be weak.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Beiträge zur Jahrestagung des Vereins für Socialpolitik 2015: Ökonomische Entwicklung - Theorie und Politik - Session: Labour market institutions, competitiveness and the current account ; No. D18-V1

Classification and Topics

• Classification: Wirtschaft ; Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data) ; International Finance: General ; Macroeconomic Aspects of International Trade and Finance: General

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Vogel, Lukas ; Kollmann, Robert ; Ratto, Marco ; Roeger, Werner ; in 't Veld, Jan
• Event: Veröffentlichung
• (when): 2015

Further information

• Handle: http://hdl.handle.net/10419/112810
• Last update: 10.03.2025, 11:42 AM CET