Let's blame Germany for its current account surplus!?

Thomas Jost

No 39, Weidener Diskussionspapiere from University of Applied Sciences Amberg-Weiden (OTH)

Abstract: Germany is often criticized for its large current account surpluses. The surpluses are caused by differences in economic growth between Germany and its major trading partners, the innovative strength of German enterprises, as well as improved relative price competitiveness and a successful integration of German enterprises into global sourcing and production networks. In addition, they are associated with inter-temporal saving and investment decisions of German households and businesses. Until the outbreak of the economic and financial crisis the elimination of exchange rate risk within the European Economic and Monetary Union (EMU) induced large net capital exports of Germany into the peripheral economies which mirrored the current account surpluses. The surplus against EMU economies has halved in recent years, whereas it has continued to rise against third countries. International trade is not a zero sum game. Increasing German exports contribute to growth in other economies due to their high import content. It does not make sense to raise German imports artificially via push button. Stronger wage growth and higher government expenditures, which are often claimed, could undermine successful economic reforms in Germany. In the longer term, due to demographic factors, the German current account surplus is expected to decline significantly.

Keywords: current account; European Monetary Union; economic growth (search for similar items in EconPapers)
JEL-codes: F32 F43 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-ger
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:hawdps:39

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