Comparing post-crisis dynamics across Euro Area countries with the Global Multi-country model

Albonico, Alice; Calès, Ludovic; Cardani, Roberta; Croitorov, Olga; Ferroni, Filippo; Giovannini, Massimo; Hohberger, Stefan; Pataracchia, Beatrice; Pericoli, Filippo Maria; Raciborski, Rafal; Ratto, Marco; Roeger, Werner; Vogel, Lukas

doi:10.1016/j.econmod.2019.04.016

Cited by 20 publications

(17 citation statements)

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“…Both developments made it less possible for Germans to invest their savings domestically and increased the German current-account after 2010. The increase in global trade and demand for German goods in the rest of the world as a driver for the German current account increases since 2010 is also identified by Albonico, Cales, Cardani, Croitorov, Ferroni, Giovannini, Hohberger, Pataracchia, Pericoli, Raciborski, Ratto, Roeger, and Vogel (2019) and Hoffmann, Kliem, Krause, Moyen, and Sauer (2020). Both papers estimate a multi-region New Keynesian DSGE model and perform a historical shock decomposition of the German trade balance.…”

Section: Introductionmentioning

confidence: 77%

Household Savings, Capital Investments and Public Policies: What Drives the German Current Account?

Ruppert

Stähler

2020

SSRN Journal

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Research QuestionWhat drives the high and persistent German current account surplus since the turn of the millennium? To many, the Agenda 2010 reforms (several structural labor market and tax reforms), population aging and pension reforms as well as a tight German fiscal stance are responsible for it. European and international institutions have repeatedly asked Germany to reduce their current account surplus. To do so, however, it is necessary to understand its driving forces. ContributionIn this paper, we present a model that can account for a large part of the changes in the German current account balance since the 2000s. The model is a three-region New Keynesian model with a search-and-matching labor market, a fiscal block that includes a wide range of taxes and disaggregated government spending, and a life-cycle structure. The latter gives rise to a savings motive, which affects the German net foreign asset position. ResultsOur simulation results suggest that the structural tax and labor market reforms of the Agenda 2010, population aging and pension reforms led to an increase in the household savings rate in Germany until about 2010. As domestic investment opportunities could not absorb these additional savings, they were partly invested abroad. The German current account-to-GDP ratio rose. Thereafter, however, household savings stayed high but did not increase further, both in the model simulations and in the data. Nevertheless, the observed German current account surplus still kept on rising. According to our simulations, a tight fiscal stance in Germany (combined with an expansionary stance in the rest of the world), a reduction in investment in the corporate sector and productivity gains in emerging economies after 2010, which increased demand for German goods and investment opportunities there, contributed to this. Nichttechnische ZusammenfassungFragestellung Was treibt den deutschen Leitungsbilanzüberschuss seit der Jahrtausendwende? Viele machen dafür die Agenda 2010-Reformen (strukturelle Arbeitsmarkt-und Steuerreformen), Bevölkerungsalterung und Rentenreformen sowie die sparsame deutsche Fiskalpolitik verantwortlich. Mehrere europäische und internationale Organisationen haben Deutschland wiederholt aufgefordert, den Leistungsbilanzüberschuss zu reduzieren. Um dies tun zu können, muss man jedoch erst verstehen, woher dieser kommt. BeitragWir präsentieren in diesem Papier ein Modell, das in der Lage ist, einen Großteil der Entwicklungen des deutschen Leistungsbilanzsaldos seit der Jahrtausendwende zu erklären. Es handelt sich um ein drei Weltregionen umfassendes neukeynesianisches Modell mit Suchfriktionen auf dem Arbeitsmarkt, einem Fiskalsektor mit differenzierter Steuerstruktur und disaggregierten Ausgabenkomponenten sowie einem Haushaltssektor mit Lebenszyklusstruktur. Diese Lebenszyklusstruktur erzeugt ein Sparmotiv, welches die deutsche Nettoauslandsvermögensposition, und damit die Leistungsbilanz, beeinflusst. ErgebnisseSimulationsergebnisse legen nahe, dass sich die Ersparnisbildung in Deutsc...

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Section: Introductionmentioning

confidence: 77%

Household Savings, Capital Investments and Public Policies: What Drives the German Current Account?

Ruppert

Stähler

2020

SSRN Journal

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“…The analysis uses the European Commission's Global Multi-country (GM) DSGE model in a three-region set-up with DE, REA and RoW. Kollmann et al (2016) describe the general structure of the GM model; Albonico et al (2019) introduce the configuration with individual EA countries, REA, and RoW and provide a detailed inventory of the model equations. The individual country block, DE in our case, has a detailed structure, whereas the REA and RoW blocks are more stylised.…”

Section: The Estimated Modelmentioning

confidence: 99%

“…In this paper, we estimate a version of the European Commission's Global Multi‐country model (GM) with Germany (DE), the rest of the EA (REA), and the rest of the world (RoW) over the period 1999q1–2018q4. GM is a structural dynamic macroeconomic (DSGE) model and is described in detail in Albonico et al (). The model builds on Kollmann et al () and is similar to the one in Kollmann, Ratto, Roeger, in't Veld, and Vogel (), who review competing hypotheses about the drivers of the DE surplus and assess their quantitative importance.…”

Section: Introductionmentioning

confidence: 99%

The euro exchange rate and Germany's trade surplus

Hohberger

Ratto

Vogel

2019

International Finance

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In the context of debates about the euro exchange rate's (EXR) impact on Germany's (DE) trade surplus, we estimate a multiregion macroeconomic model (1999–2018) and provide a counterfactual in which we simulate the shocks of the estimated model in an alternative setting with freely floating nominal EXRs. The results suggest a reduction of the DE trade surplus by up to 1.3% of gross domestic product (GDP; around 1/4 of the surplus) during 2010–2015 compared to the data, together with a stronger real effective EXR (REER). The rest of the euro area (REA) net exports are more negative (by up to −0.6% of GDP) in the counterfactual before the EA crisis, but more positive (by up to 0.4% of GDP) in recent years. Overall, the counterfactual DE and REA trade balance and REER trajectories are very similar to the actual paths. Modifying shock processes in the counterfactual would give rise to larger differences.

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“…All these simulations and historical decomposition exercises have been computed using the latest version of the dynamic and stochastic general equilibrium model the estimated rational expectation model for Spain (EREMS) (Boscá et al , 2020e). This model is similar to those used by different international institutions such as, for example, the European Commission (EC; see Kollmann et al , 2016, or Albonico et al , 2017), and is based on an earlier version (Boscá et al , 2011), which was extended introducing a banking sector and a wide set of structural shocks. Using the theoretical constraints of the model, it is possible to estimate the structural shocks and their contributions to the behaviour of the main macroeconomic aggregates over time.…”

Section: Introductionmentioning

confidence: 99%

The stabilizing effects of economic policies in Spain in times of COVID-19

Boscá

Doménech

Ferri

et al. 2021

AEA

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Purpose This paper aims to analyse the stabilizing macroeconomic effects of economic policies during the COVID-19 crisis in Spain. Design/methodology/approach The contribution of the structural shocks that explain the behaviour of the main macroeconomic aggregates during 2020 are estimated, and the effects of economic policies are simulated using a dynamic stochastic general equilibrium (DSGE) model estimated for the Spanish economy. Findings The results highlight the importance of supply and demand shocks in explaining the COVID-19 crisis. The annual fall in gross domestic product (GDP) moderates at least by 7.6 points in the most intense period of the crisis, thanks to these stabilizing policies. Finally, the potential effects of Next Generation EU in the Spanish economy are estimated. Assuming that Spain may receive from the EU between 1.5 and 2.25 percentage points (pp) of GDP, activity could increase to between 2 and 3 pp in 2024. Originality/value To the best of the authors’ knowledge, the exercises and findings are original. All these results show the usefulness of a DSGE model, such as the estimated rational expectation model for Spain, as a practical tool for the applied economic analysis, the macroeconomic assessment of economic policies and the understanding of the Spanish economy.

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Comparing post-crisis dynamics across Euro Area countries with the Global Multi-country model

Cited by 20 publications

References 37 publications

Household Savings, Capital Investments and Public Policies: What Drives the German Current Account?

Household Savings, Capital Investments and Public Policies: What Drives the German Current Account?

The euro exchange rate and Germany's trade surplus

The stabilizing effects of economic policies in Spain in times of COVID-19

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