Is the German trade surplus hurting the US? Scott Sumner doesn’t think so, especially since he believes that if the US were to get a boost by increased exports to Germany the Fed would offset it by raising rates faster and decrease aggregate demand. If Germany were to increase defense spending from 1.2% to 2%, as Trump suggested, how would that affect its trade surplus? Sumner calculates that this would reduce the surplus by less than 0.8%.
The WSJ on the German trade surplus
By: Scott Sumner – George Mason University
Trade rebalancing in the Eurozone
Last year in the Eurozone, Setser argues, fiscal contraction came from surplus countries, mostly the Netherlands and Germany while fiscal expansion came from deficit countries like Italy and Spain.
Using Fiscal Policy to Drive Trade Rebalancing Turns Out To Be Hard
By: Brad Setser- Council on Foreign Relations
Guntram Wolff argues that during the last 10 years external deficit adjustments in the Eurozone happened through increases in exports and not through suppression of imports. He constructs a benchmark that breaks export-to-GDP share into five constituent components and finds that in the last 10 years Germany saw its exports increase only slightly in terms of GDP.
How export growth achieved adjustment of massive trade deficits in the euro area
By: Guntram Wolff – Bruegel
How to reduce Germany’s trade surplus
Barry Eichengreen argues that the solution is for Germany to increase investment spending on infrastructure, health and education.
Is Germany Unbalanced or Unhinged?
By: Barry Eichengreen – Berkeley
For Horn and al. expansionary fiscal policy combined with a wage policy can only significantly decrease the German trade surplus.
The role of nominal wages in trade and current account surpluses
Authors: Gustav A. Horn, Fabian Lindner, Sabine Stephan, Rudolf Zwiener
From: IMK
