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A Sovereign Wealth Fund to Lift Germany’s Curse of Excess Savings

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  • Gros, Daniel
  • Mayer, Thomas

Abstract

As an alternative to the present system of intermediation of the German savings surplus, this paper suggests that the risk-adjusted rate of return could be improved by creating a sovereign wealth fund for Germany (designated DESWF), which could invest excess German savings globally. Such a DESWF would offer German savers a secure vehicle paying a guaranteed positive minimum real interest rate, with a top-up when real investment returns allowed. The vehicle would invest the funds in a portfolio that is highly diversified by geography and asset classes. Positive real returns can be expected in the long run based on positive real global growth. Since, in this case, a significant amount of funds would flow outside the euro area, the euro would depreciate, which would help crisis countries presently struggling to revive growth through exports and to close their external deficits so as to recoup their international credit-worthiness. Target imbalances would gradually disappear and German claims abroad would move from nominal claims on the ECB to diversified real and nominal claims on various private and public foreign entities in a variety of asset classes.

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File URL: http://www.ceps.eu/system/files/book/2012/08/PB280%20DG%20%2526%20TM%20on%20DESWF.pdf
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Bibliographic Info

Paper provided by Centre for European Policy Studies in its series CEPS Papers with number 7229.

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Length: 7 pages
Date of creation: Aug 2012
Date of revision:
Handle: RePEc:eps:cepswp:7229

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  1. Hans-Werner Sinn & Timo Wollmershaeuser, 2011. "Target Loans, Current Account Balances and Capital Flows: The ECB’s Rescue Facility," NBER Working Papers 17626, National Bureau of Economic Research, Inc.
  2. Joseph E. Gagnon, 2012. "Combating Widespread Currency Manipulation," Policy Briefs PB12-19, Peterson Institute for International Economics.
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Cited by:
  1. Stephen Cecchetti & Robert McCauley & Patrick McGuire, 2012. "Interpreting TARGET2 balances," BIS Working Papers 393, Bank for International Settlements.
  2. Guonan Ma & Robert N McCauley, 2013. "Global and euro imbalances: China and Germany," BIS Working Papers 424, Bank for International Settlements.
  3. Giovanni Melina & Yi Xiong, 2013. "Natural Gas, Public Investment and Debt Sustainability in Mozambique," IMF Working Papers 13/261, International Monetary Fund.

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