Simon Grothe

Date of Award

Spring 2022




Gennaro Zezza, Ph.D.


This thesis presents a stock-flow consistent model (SFC) that analyzes the effects of Germany’s wage moderation on other Eurozone economies. It

shows that excessive German saving comes at a cost: the decoupling of pro- ductivity growth and real wage growth for the largest share of the German

workforce relies on internal and external debt. The SFC model presented in this paper is inspired by the recent Eurozone model by Gräbner et al. (2021) that is published as a working paper. Germany’s wage moderation will be

discussed as an example for how income inequality reduces domestic aggre- gate demand but gets compensated through an increase in net exports. This allows to derive some general conclusions about the nexus between income inequality, secular stagnation and financial instability. If the institutional structure of the EMU is not changed, Germany will continue to free-ride on the aggregate demand created by debt-led growth in peripheral EMU economies.

Access Control

Open Access

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Economics Commons