What drives the German current account? And how does it affect other EU Member States?

Kollmann, Robert; Ratto, Marco; Roeger, Werner; Veld, Jan in ’t; Vogel, Lukas

doi:10.1093/epolic/eiu004

Cited by 109 publications

(77 citation statements)

References 48 publications

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“…A Spanish final good sector combines domestic and imported intermediates and produces a homogeneous final good that is used for The Spanish block builds on the QUEST model of the EU economy (Ratto et al, 2009). Other versions of that model have been estimated with US and German data (in 't Veld et al (2011); Kollmann et al (2014)). The presentation here abstracts from factor adjustment costs and variable capacity utilization rates assumed in the estimated model.…”

Section: Model Descriptionmentioning

confidence: 99%

International capital flows and the boom-bust cycle in Spain

Veld

Kollmann

Pataracchia

et al. 2014

Journal of International Money and Finance

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We study the joint dynamics of foreign capital flows and real activity during the recent boom-bust cycle of the Spanish economy, using a three-country New Keynesian model with credit-constrained households and firms, a construction sector and a government. We estimate the model using 1995Q1-2013Q2 data for Spain, the rest of the Euro Area (REA) and the rest of the world. We show that falling risk premia on Spanish housing and nonresidential capital, a loosening of collateral constraints for Spanish households and firms, as well as a fall in the interest rate spread between Spain and the REA fuelled the Spanish output boom and the persistent rise in foreign capital flows to Spain, before the global financial crisis. During and after the global financial crisis, falling house prices, and a tightening of collateral constraints for Spanish borrowers contributed to a sharp reduction in capital inflows, and to the persistent slump in Spanish real activity. The credit crunch was especially pronounced for Spanish households; firm credit constraints tightened later and more gradually, and contributed much less to the slump.

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Section: Model Descriptionmentioning

confidence: 99%

International capital flows and the boom-bust cycle in Spain

Veld

Kollmann

Pataracchia

et al. 2014

Journal of International Money and Finance

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“…Regarding Germany, our study is in line with Anders (2017), who also predicts that wage rises, increased investment and aging populations will be the sources of drops in current account surpluses in Germany in the future years. Besides, Kollmann et al (2015) illustrate that the drivers of possible decrease in current account surpluses in Germany are expected to be expansionary fi scal policy as well as wage rises. Although the drivers of surpluses for Germany are investigated in several studies, future studies are needed to reveal them for Austria and Denmark.…”

Section: Online First Online Firstmentioning

confidence: 99%

Sustainability of Current Account Surpluses: Evidence from European Countries

Sivrikaya¹,

Kurul²

2020

Prague Economic Papers

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Over the last two decades, the current accounts in the European Union (EU) have diverged substantially. This divergence has raised concerns about the sustainability of the core countries' current account surpluses since the peripheral countries' financing of their significantly rising levels of current deficits depends on them. In this study, by applying both linear and nonlinear unit root tests and taking into account structural breaks in the datagenerating process, we examine the current account sustainability of the main core countries with large external surpluses. We find that the current accounts of Austria, Denmark and Germany are not on sustainable paths, which suggests that the core economies might not continue to run surpluses to finance the peripheral countries' external deficits. The results of this study imply that the policymakers in peripheral countries might take proactive measures against possible borrowing problems and capital outflow risk in the future.

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“…With the exception of the preference shocks, whose dynamics have been calibrated following Kollmann et al (2014), the parameters characterizing the dynamics of the technology shocks have been estimated employing the time series for Germany, France, Italy, and Spain of labor productivity per hours worked. All the series are chain-linked volumes re-based in 2010, seasonally adjusted and filtered by means of a Hodrick-Prescott filter.…”

Section: Equilibrium and Calibrationmentioning

confidence: 99%

“…In particular, these imbalances in the Euro Area have grown considerably. For references see Schmitz and Von Hagen (2011) and Kollmann et al (2014), while we follow Hjortsø (2016) in our idea to coordinate fiscal policy by reducing international demand imbalances. Given the assumption of complete financial markets, we focus on net exports because the current account and net foreign assets remain in balance.…”

Section: Notesmentioning

confidence: 99%

One Emu Fiscal Policy for the Euro

2019

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We build a two-country New-Keynesian DSGE model of a Currency Union to study the effects of fiscal policy coordination, by evaluating the stabilization properties and welfare implications of different fiscal policy scenarios. Our main findings are that a government spending rule which targets the net exports gap rather than the domestic output gap produces more stable dynamics and that consolidating government budget constraints across countries with symmetric tax rate movements provides greater stabilization. A key role is played by the trade elasticity which determines the impact of the terms of trade on net exports. In fact, when goods are complements, the stabilization properties of coordinating fiscal policies are no longer supported. These findings point out to possible policy prescriptions for the Euro Area: to coordinate fiscal policies by reducing international demand imbalances, either by stabilizing trade flows across countries or by creating some form of Fiscal Union or both.

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What drives the German current account? And how does it affect other EU Member States?

Cited by 109 publications

References 48 publications

International capital flows and the boom-bust cycle in Spain

International capital flows and the boom-bust cycle in Spain

Sustainability of Current Account Surpluses: Evidence from European Countries

One Emu Fiscal Policy for the Euro

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