Germany: Selected Issues

July 21, 2014

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Germany: Selected Issues, (USA: International Monetary Fund, 2014) accessed November 21, 2024

Summary

This Selected Issues paper on Germany focuses on current economic condition in the country. The build-up of Germany’s current account surplus over the last decade does not lend itself to a single-factor explanation, as both global and domestic factors, as well as policy changes led to increased savings and lower investment. All sectors contributed to the build-up of the surplus. Although fiscal consolidation and higher household savings played a role, the corporate sector experienced a more pronounced shift. This paper provides a retrospective on these developments and explores whether the factors contributing to the surplus are likely to be reversed going forward. Although there are common global drivers for the non-financial corporations shift to a net lender position, several German-specific factors played a role, notably the labor market reforms in the 2000s, the business tax reforms, and the globalization of German firms’ production chains. The households’ saving–investment gap widened in the early 2000s as the pension reforms and growing income inequality boosted households’ savings and residential investment declined by the end of the reunification construction boom.

Subject: Balance of payments, Current account surpluses, Expenditure, Financial institutions, Insurance companies, Labor, Minimum wages, Public investment spending, Wages

Keywords: Asia and Pacific, Bank, Bundesbank, CR, Current account surpluses, East Asia, ESRB recommendation, Europe, FSC member, Global, Housing price shock, Insurance companies, ISCR, Minimum wages, OECD PMR indicator, OECD product market regulation indicator, Public investment spending, Wages

Publication Details

Pages:

72
Volume:

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DOI:

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Issue:

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Series:

Country Report No. 2014/217
Stock No:

1DEUEA2014002
ISBN:

9781498328524
ISSN:

1934-7685

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