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The German Current Account Surplus: Where Does It Come From, Is It Harmful and Should Germany Do Something about It?

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Listed:
  • Gabriel Felbermayr
  • Clemens Fuest
  • Timo Wollmershäuser

Abstract

In the international economic policy debate Germany is criticized heavily for its current account surplus. This paper describes the factors that have led to the surplus and discusses the policy implications. The current account surplus is mainly a result of higher savings, driven by an ageing population. The claim that the German surplus causes economic damage either in Germany or in other countries is not well founded. But Germany faces growing political pressures related to the threat of protectionism, the risk that a growing creditor position may lead to political backlash, and the fact that European Macroeconomic Imbalances Procedures imply that current account surpluses should not exceed six percent of GDP. To reduce the surplus Germany should focus on a corporate tax reform to boost private investment.

Suggested Citation

  • Gabriel Felbermayr & Clemens Fuest & Timo Wollmershäuser, 2017. "The German Current Account Surplus: Where Does It Come From, Is It Harmful and Should Germany Do Something about It?," EconPol Policy Reports 2, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    • Handle: RePEc:ces:econpr:_2
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    File URL: https://www.ifo.de/DocDL/EconPol_Policy_Report_02_2017_German_Account_Surplus.pdf
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    Cited by:

    1. Christian Grimme & Timo Wollmershäuser, 2017. "Zu den Auswirkungen von Rohstoffpreisänderungen auf den Leistungsbilanzsaldo," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 70(14), pages 44-46, July.
    2. Schön, Matthias & Stähler, Nikolai, 2020. "When old meets young? Germany's population ageing and the current account," Economic Modelling, Elsevier, vol. 89(C), pages 315-336.
    3. Christina Graf & Christian Grimme, 2017. "Der Einfluss der Vermögenseinkommen auf den deutschen Leistungsbilanzüberschuss," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 70(22), pages 38-44, November.
    4. Ruppert, Kilian & Stähler, Nikolai, 2022. "What drives the German current account? Household savings, capital investments and public policies," Economic Modelling, Elsevier, vol. 108(C).
    5. Jan Priewe, 2018. "A time bomb for the Euro? Understanding Germany's current account surplus," IMK Studies 59-2018, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.

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