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Exportweltmeister: The Low Returns on Germany’s Capital Exports

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  • Schularick, Moritz
  • Hünnekes, Franziska
  • Trebesch, Christoph

Abstract

Germany is world champion in exporting capital (\Exportweltmeister"). No other country invests larger amounts of savings outside its borders. However, Germany plays in the third division when it comes to investment performance, as we show in this paper. We study the returns on German foreign investments from 1950 to 2017 and find that: (1) Germany's annual returns on foreign assets were 2 to 5 percentage points lower than those of comparable countries. Germany ranks last among the G7 countries, also in the last decade; (2) Domestic returns on German assets have outperformed foreign returns abroad by about 3 percentage points per year; (3) Germany's external wealth provides very little consumption insurance as foreign returns are highly correlated with domestic activity; (4) The capital exports do little to diversify demographic risks as Germany mainly invests in countries with similar demographics. Taken together, these facts raise substantial doubts whether German households, firms, and banks allocate their savings in a beneficial way.

Suggested Citation

  • Schularick, Moritz & Hünnekes, Franziska & Trebesch, Christoph, 2019. "Exportweltmeister: The Low Returns on Germany’s Capital Exports," CEPR Discussion Papers 13863, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:13863
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    More about this item

    Keywords

    International capital flows; Foreign assets; Foreign returns;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F30 - International Economics - - International Finance - - - General
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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