Exportweltmeister: The Low Returns on Germany's Capital Exports

77 Pages Posted: 2 Aug 2019

See all articles by Franziska Huennekes

Franziska Huennekes

Ludwig Maximilian University of Munich (LMU)

Moritz Schularick

University of Bonn - Department of Economics; Centre for Economic Policy Research (CEPR)

Christoph Trebesch

Kiel Institute for the World Economy; Centre for Economic Policy Research (CEPR)

Date Written: July 2019

Abstract

Germany is world champion in exporting capital (\Exportweltmeister"). No other country invests larger amounts of savings outside its borders. However, Germany plays in the third division when it comes to investment performance, as we show in this paper. We study the returns on German foreign investments from 1950 to 2017 and find that: (1) Germany's annual returns on foreign assets were 2 to 5 percentage points lower than those of comparable countries. Germany ranks last among the G7 countries, also in the last decade; (2) Domestic returns on German assets have outperformed foreign returns abroad by about 3 percentage points per year; (3) Germany's external wealth provides very little consumption insurance as foreign returns are highly correlated with domestic activity; (4) The capital exports do little to diversify demographic risks as Germany mainly invests in countries with similar demographics. Taken together, these facts raise substantial doubts whether German households, firms, and banks allocate their savings in a beneficial way.

Keywords: Foreign Assets, Foreign returns, International Capital Flows

JEL Classification: F21, F30, F31, F36, G15

Suggested Citation

Huennekes, Franziska and Schularick, Moritz and Trebesch, Christoph, Exportweltmeister: The Low Returns on Germany's Capital Exports (July 2019). CEPR Discussion Paper No. DP13863. Available at SSRN: https://ssrn.com/abstract=3428387

Franziska Huennekes (Contact Author)

Ludwig Maximilian University of Munich (LMU) ( email )

Geschwister-Scholl-Platz 1
Munich, Bavaria 80539
Germany

Moritz Schularick

University of Bonn - Department of Economics ( email )

Bonn
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Christoph Trebesch

Kiel Institute for the World Economy ( email )

P.O. Box 4309
Kiel, Schleswig-Hosltein D-24100
Germany

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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