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

Niklas Gadatsch, Nikolai Stähler and Benjamin Weigert

No 29/2015, Discussion Papers from Deutsche Bundesbank

Abstract: 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.

Keywords: Fiscal Policy; Labor Market Reforms; DSGE Modeling; Macroeconomics (search for similar items in EconPapers)
JEL-codes: E32 E62 H2 J6 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-dge, nep-eec, nep-mac, nep-opm and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: German labor market and fiscal reforms 1999–2008: Can they be blamed for intra-euro area imbalances? (2016)
Working Paper: German Labor Market and Fiscal Reforms 1999 to 2008: Can They be Blamed for Intra-Euro Area Imbalances? (2015)
Working Paper: German labor market and fiscal reforms 1999 to 2008: Can they be blamed for intra-Euro Area imbalances? (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdps:292015

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