Klaus-Jürgen Gern (Kiel Institute, Forecasting Center)
The persistently high German current account surpluses are subject to increasing international criticism based on the presumption that they are negative for both domestic and foreign economies. Against this backdrop, the Forecasting Center has studied the effect of eight economic policy measures on the current account balance using the global macroeconometric model NiGEM. These measures include macroeconomic measures that the government can implement directly, such as an increase in public spending or tax cuts, and measures that are more hypothetical in their nature as the government can not directly implement them, such as an increase in wages. Also the impact of selected structural policies on the current account is evaluated. According to the model simulations, debt-financed expansionary fiscal policy measures have the largest impact on the German current account balance. However, if these measures are implemented in a fiscally neutral way, their effects on the current account balance will be significantly smaller.
Klaus-Jürgen gern (Kiel Institute)