EconPapers    
Economics at your fingertips  
 

Penny wise and pound foolish? On the income from Germany’s foreign investments

Thomas Knetsch and Arne Nagengast ()

Review of World Economics (Weltwirtschaftliches Archiv), 2017, vol. 153, issue 4, 753-778

Abstract: Abstract Recently, Germany’s current account surpluses have been a cause of concern both in the public debate as well as in policy circles. Although accumulating net foreign assets appears reasonable against the background of population ageing, one of the criticisms that has been voiced repeatedly in this regard is that Germany’s savings are being squandered abroad. In order to disentangle the dynamics of the German investment income balance, we apply a novel decomposition framework to a rich German dataset spanning 11 different asset classes between 1999 and 2014. First, we show that Germany gained a yield privilege in this time period and that it would not have been more profitable to invest German savings in domestic assets. Second, the accumulation of net foreign assets accounted for 60% of the rise in the investment income balance. Third, the global decline in interest rates in the aftermath of the global financial crisis led to an appreciable dent in net investment income receipts, which leaves scope for a risk sharing interpretation.

Keywords: Investment income balance; Return differential; Exorbitant privilege; International risk sharing (search for similar items in EconPapers)
JEL-codes: E50 F36 F45 G15 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5) Track citations by RSS feed

Downloads: (external link)
http://link.springer.com/10.1007/s10290-017-0283-3 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
Working Paper: On the dynamics of the investment income balance (2016) Downloads
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:spr:weltar:v:153:y:2017:i:4:d:10.1007_s10290-017-0283-3

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/10290/PS2

DOI: 10.1007/s10290-017-0283-3

Access Statistics for this article

Review of World Economics (Weltwirtschaftliches Archiv) is currently edited by Paul Bergin, Holger Görg, Cédric Tille and Gerald Willmann

More articles in Review of World Economics (Weltwirtschaftliches Archiv) from Springer, Institut für Weltwirtschaft (Kiel Institute for the World Economy) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla ().

 
Page updated 2020-04-28
Handle: RePEc:spr:weltar:v:153:y:2017:i:4:d:10.1007_s10290-017-0283-3