The origins of the German current account surplus: Unbalanced productivity growth and structural change
AbstractThe surge in the German current account surplus in the 2000s is often interpreted as the result of efficiency-enhancing structural reforms, especially in the labor market. However, this interpretation is puzzling because the growth rate of the German economy has been one of the lowest in the Euro area in the 2000s. Using empirical evidence and a simple theoretical two-sector model, the paper argues that the German surplus is closely linked to the increasing gap between productivity growth in manufacturing and services. Such gap is due not only to improvements in the manufacturing sector but also to a significant slowdown of productivity growth in services. Therefore, despite the success in export markets, the German surplus may signal long-run weaknesses associated with constraints on service growth and the inability of productivity growth in manufacturing to create positive spill-over effects on services. Persistence of barriers to liberalization in services may partly explain these phenomena. The paper concludes that higher and more balanced growth could lead to an equilibrium reduction of the current account surplus.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 9527.
Date of creation: Jun 2013
Date of revision:
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Find related papers by JEL classification:
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-09-26 (All new papers)
- NEP-EEC-2013-09-26 (European Economics)
- NEP-EFF-2013-09-26 (Efficiency & Productivity)
- NEP-EUR-2013-09-26 (Microeconomic European Issues)
- NEP-MAC-2013-09-26 (Macroeconomics)
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