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German Exports on the Rise: Domestic Demand Should Follow

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Author Info

  • Mechthild Schrooten
  • Isabel Teichmann

Abstract

German exports suffered a sharp decline during the international economic and financial crisis. But recently a strong turnaround has taken place. Macroeconomic stimulus measures in numerous countries have likely contributed to this export recovery. Germany's manufacturers are at the forefront of the resurgence in exports. The mechanical engineering, chemicals, and automotive industries in particular have realized remarkable export surpluses. Germany's current account surplus has risen considerably over the last ten years. As a result, Germany has cemented its position as a net creditor and investor in the international financial market. The challenge now is to link the strength of Germany's exporting industries to the domestic demand. In doing so, long-term and stable growth for the overall economy could be reached. In short, Germany must overcome the dichotomy between its strong export economy and weak domestic demand. One strategy for strengthening domestic demand could be to relax the policy of wage restraint pursued in the years prior to the crisis.

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Bibliographic Info

Article provided by DIW Berlin, German Institute for Economic Research in its journal Weekly Report.

Volume (Year): 6 (2010)
Issue (Month): 31 ()
Pages: 231-236

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Handle: RePEc:diw:diwwrp:wr6-31

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Keywords: Trade; Open Economy Macroeconomics; International Relations;

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