How to reduce Germany's current account surplus?

Jan Behringer, Till van Treeck and Achim Truger

No 8, Working Papers from Forum New Economy

Abstract: Germany has had a large and persistent current account surplus for the past almost two decades. We review different theoretical explanations of this phenomenon and conclude from the empirical litera-ture that Germany’s external surplus reflects an imbalance that is a threat to macroeconomic stability at both the national and the international level. Interestingly, although intertemporal general equilibrium models highlight the role of private households in determining national current account positions, the increase in Germany’s external balance for the most part is the reflection of larger financial balances of the corporate sector and the government. While the share of the national income going to the private household sector has declined dramatically since the early 2000s, the corresponding increase in the income share of the private corporate sector and the government was not accompanied by higher spending by these sectors on goods and services as a percentage of GDP. We discuss how the exter-nal surplus might be reduced through (a combination of) higher public and private demand for goods and services and shorter working hours.

Keywords: current account; external adjustment; sectoral balances; income distribution (search for similar items in EconPapers)
JEL-codes: D31 D33 E21 F32 F41 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2020-12
New Economics Papers: this item is included in nep-mac and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published

Downloads: (external link)
https://newforum.org/wp-content/uploads/2021/07/FNE-WP08-2020.pdf First version, 2020 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:agz:wpaper:2008

Access Statistics for this paper

More papers in Working Papers from Forum New Economy
Bibliographic data for series maintained by Xhulia Likaj ().