Household Savings, Capital Investments and Public Policies: What Drives the German Current Account?

Abstract

Research QuestionWhat drives the high and persistent German current account surplus since the turn of the millennium? To many, the Agenda 2010 reforms (several structural labor market and tax reforms), population aging and pension reforms as well as a tight German fiscal stance are responsible for it. European and international institutions have repeatedly asked Germany to reduce their current account surplus. To do so, however, it is necessary to understand its driving forces. ContributionIn this paper, we present a model that can account for a large part of the changes in the German current account balance since the 2000s. The model is a three-region New Keynesian model with a search-and-matching labor market, a fiscal block that includes a wide range of taxes and disaggregated government spending, and a life-cycle structure. The latter gives rise to a savings motive, which affects the German net foreign asset position. ResultsOur simulation results suggest that the structural tax and labor market reforms of the Agenda 2010, population aging and pension reforms led to an increase in the household savings rate in Germany until about 2010. As domestic investment opportunities could not absorb these additional savings, they were partly invested abroad. The German current account-to-GDP ratio rose. Thereafter, however, household savings stayed high but did not increase further, both in the model simulations and in the data. Nevertheless, the observed German current account surplus still kept on rising. According to our simulations, a tight fiscal stance in Germany (combined with an expansionary stance in the rest of the world), a reduction in investment in the corporate sector and productivity gains in emerging economies after 2010, which increased demand for German goods and investment opportunities there, contributed to this. Nichttechnische ZusammenfassungFragestellung Was treibt den deutschen Leitungsbilanzüberschuss seit der Jahrtausendwende? Viele machen dafür die Agenda 2010-Reformen (strukturelle Arbeitsmarkt-und Steuerreformen), Bevölkerungsalterung und Rentenreformen sowie die sparsame deutsche Fiskalpolitik verantwortlich. Mehrere europäische und internationale Organisationen haben Deutschland wiederholt aufgefordert, den Leistungsbilanzüberschuss zu reduzieren. Um dies tun zu können, muss man jedoch erst verstehen, woher dieser kommt. BeitragWir präsentieren in diesem Papier ein Modell, das in der Lage ist, einen Großteil der Entwicklungen des deutschen Leistungsbilanzsaldos seit der Jahrtausendwende zu erklären. Es handelt sich um ein drei Weltregionen umfassendes neukeynesianisches Modell mit Suchfriktionen auf dem Arbeitsmarkt, einem Fiskalsektor mit differenzierter Steuerstruktur und disaggregierten Ausgabenkomponenten sowie einem Haushaltssektor mit Lebenszyklusstruktur. Diese Lebenszyklusstruktur erzeugt ein Sparmotiv, welches die deutsche Nettoauslandsvermögensposition, und damit die Leistungsbilanz, beeinflusst. ErgebnisseSimulationsergebnisse legen nahe, dass sich die Ersparnisbildung in Deutsc...