Abstract
In this paper, we analyze structural changes and dynamic adjustments in a three-region open-economy New Keynesian model with search and matching labor market and a life-cycle structure to investigate the driving forces of the German current account over time. We show that population aging as well as several tax, labor market and pension reforms led to an increase in the household savings rate in Germany. Tight fiscal policy and a domestic corporate savings glut reduced investment opportunities notably after 2010. Together with productivity growth in the rest of the world, this significantly contributes to the German current account surplus since the early 2000s.
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