A model-based analysis of the macroeconomic impact of the refugee migration to Germany

By simulating various (labour market) integration scenarios with the aid of a New Keynesian DSGE model, this paper explores the potential economic consequences and transmission mechanisms resulting from the recent refugee migration to Germany. We find that the long-run costs and benefits for domestic agents depend critically on the skill levels migrants will obtain in the long run. A failure to integrate the about 800,000 migrants (equivalent to 1% of initial German population) could reduce per capita output and consumption by 0.43% and 0.48%, respectively, while integration measures that improve their qualification structure could even yield per capita output and consumption gains of 0.34% and 0.38%, respectively. Measures that cause the migrant qualification structure to closely match that of the native population over the long term do not lead to significant changes in GDP and consumption. Overall, our model simulations suggest that the macroeconomic impact of refugee migration is small.