German labor market and fiscal reforms 1999 to 2008: Can they be blamed for intra-euro area imbalances?

Arbeitspapier

In this paper, we assess the impact of major German structural reforms from 1999 to 2008 on key macroeconomic variables. By many, these reforms, especially the Hartz reforms on the labor market, are considered to be the root of observed imbalances in the Euro Area. Our simulations within a two-country monetary union DSGE model show that, in terms of German GDP, consumption, investment and (un)employment, the reforms were a clear success albeit the impact on the German current account was only minor. Most importantly, the rest of the Euro Area benefited from positive spillover effects. Hence, our analysis suggests that the reforms cannot be held responsible for the currently observed macroeconomic imbalances within the Euro Area. Further simulations highlight the importance of increased savings preferences in Germany to explain the latter.

Object Details

• ISBN: 978-3-95729-184-4
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Bundesbank Discussion Paper ; No. 29/2015

Classification and Topics

• Classification: Wirtschaft ; Business Fluctuations; Cycles ; Fiscal Policy
• Subject: Fiscal Policy ; Labor Market Reforms ; DSGE Modeling ; Macroeconomics

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Gadatsch, Niklas ; Stähler, Nikolai ; Weigert, Benjamin
• Event: Veröffentlichung
• (who): Deutsche Bundesbank
• (where): Frankfurt a. M.
• (when): 2015

Further information

• Handle: http://hdl.handle.net/10419/115889
• Last update: 10.03.2025, 11:41 AM CET