Title: What drives the German current account? And how does it affect other EU member states?
Citation: ECONOMIC POLICY vol. 30 no. 81 p. 47-93
Publication Year: 2015
JRC N°: JRC88946
ISSN: 0266-4658
URI: http://economicpolicy.oxfordjournals.org/content/early/2014/12/02/epolic.eiu004
DOI: 10.1093/epolic/eiu004
Type: Articles in periodicals and books
Abstract: We estimate a three-country model using data for Germany, the Rest of the Euro Area (REA) and the Rest of the World (ROW) to analyze the determinants of Germany’s current account surplus after the launch of the Euro. The most important factors driving the German surplus were positive shocks to the German saving rate and to ROW demand for German exports, as well as German labor market reforms and other positive German aggregate supply shocks. The convergence of REA interest rates to German rates due to the creation of the Euro had a modest effect on the German trade balance and on German real activity. The key shocks that drove the rise in German net exports tended to worsen the REA trade balance, but only had a weak effect on REA real activity.
JRC Directorate:Space, Security and Migration

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