Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/224148 
Year of Publication: 
2019
Series/Report no.: 
Working Paper No. 114
Publisher: 
Osnabrück University, Institute of Empirical Economic Research, Osnabrück
Abstract: 
We analyze current account imbalances through the lens of the two largest surplus countries; China and Germany. We observe two striking patterns visible since the 2007/8 Global Financial Crisis. First, while China has been gradually reducing its current account surplus, Germany's surplus has continued to increase throughout and after the crisis. Second, for these two countries, there is a remarkable reversal in the patterns of exchange rate misalignment: China's currency has turned from being undervalued to overvalued, Germany's currency has erased its level of overvaluation and become undervalued. Our empirical analyses show that the current account balances of these two countries are quite well explained by currency misalignment, common economic factors, and country-specific factors. Furthermore, we highlight the global financial crisis effects and, for Germany, the importance of differentiating balances against euro and non-euro countries.
Subjects: 
Currency Misalignment
Current Account Surplus
Global Imbalances
Global Financial Crisis
JEL: 
F15
F31
F32
Document Type: 
Working Paper

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