Exportweltmeister: The Low Returns on Germany’s Capital Exports

Moritz Schularick, Hünnekes, Franziska and Christoph Trebesch

No 13863, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Germany is world champion in exporting capital (\Exportweltmeister"). No other country invests larger amounts of savings outside its borders. However, Germany plays in the third division when it comes to investment performance, as we show in this paper. We study the returns on German foreign investments from 1950 to 2017 and find that: (1) Germany's annual returns on foreign assets were 2 to 5 percentage points lower than those of comparable countries. Germany ranks last among the G7 countries, also in the last decade; (2) Domestic returns on German assets have outperformed foreign returns abroad by about 3 percentage points per year; (3) Germany's external wealth provides very little consumption insurance as foreign returns are highly correlated with domestic activity; (4) The capital exports do little to diversify demographic risks as Germany mainly invests in countries with similar demographics. Taken together, these facts raise substantial doubts whether German households, firms, and banks allocate their savings in a beneficial way.

Keywords: International capital flows; Foreign assets; Foreign returns (search for similar items in EconPapers)
JEL-codes: F21 F30 F31 F36 G15 (search for similar items in EconPapers)
Date: 2019-07
New Economics Papers: this item is included in nep-opm
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Citations: View citations in EconPapers (4)

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