Germany: Selected Issues

International Monetary Fund

No 2014/217, IMF Staff Country Reports from International Monetary Fund

Abstract: This Selected Issues paper on Germany focuses on current economic condition in the country. The build-up of Germany’s current account surplus over the last decade does not lend itself to a single-factor explanation, as both global and domestic factors, as well as policy changes led to increased savings and lower investment. All sectors contributed to the build-up of the surplus. Although fiscal consolidation and higher household savings played a role, the corporate sector experienced a more pronounced shift. This paper provides a retrospective on these developments and explores whether the factors contributing to the surplus are likely to be reversed going forward. Although there are common global drivers for the non-financial corporations shift to a net lender position, several German-specific factors played a role, notably the labor market reforms in the 2000s, the business tax reforms, and the globalization of German firms’ production chains. The households’ saving–investment gap widened in the early 2000s as the pension reforms and growing income inequality boosted households’ savings and residential investment declined by the end of the reunification construction boom.

Keywords: ISCR; CR; Bundesbank; OECD product market regulation indicator; bank; FSC member; housing price shock; OECD PMR indicator; ESRB recommendation; Public investment spending; Minimum wages; Insurance companies; Current account surpluses; Wages; Global; Europe; East Asia; Asia and Pacific (search for similar items in EconPapers)
Pages: 72
Date: 2014-07-21
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Citations: View citations in EconPapers (1)

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