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German unification: what have we learned from multi-country models?

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Author Info

  • Joseph E. Gagnon
  • Paul R. Masson
  • Warwick J. McKibbin

Abstract

This study reports on early simulations of the effects of German unification using three different rational-expectations multi-country models. Despite significant differences in their structures and in the implementations of the unification shock, the models delivered a number of common results that proved to be a reasonably accurate guide to the direction and magnitude of the effects of unification on most key macroeconomic variables. In particular, unification was expected to give rise to an increase in German aggregate demand that would put upward pressure on output, inflation, and the exchange rate, and downward pressure on the current account balance in Germany. The model simulations also highlighted the contractionary effects of high German interest rates on other member countries of the Exchange Rate Mechanism of the European Monetary System.

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File URL: http://www.federalreserve.gov/pubs/ifdp/1996/547/ifdp547.pdf
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Bibliographic Info

Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series International Finance Discussion Papers with number 547.

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Date of creation: 1996
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Handle: RePEc:fip:fedgif:547

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Related research

Keywords: Germany ; Interest rates;

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References

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  1. Adams, Gwyn & Alexander, Lewis & Gagnon, Joseph, 1993. "German unification and the European Monetary System: A quantitative analysis," Journal of Policy Modeling, Elsevier, vol. 15(4), pages 353-392, August.
  2. Mckibbin, W.J., 1990. "Some Global Macroeconomic Implications Of German Unification," Papers 81, Brookings Institution - Working Papers.
  3. Lewis S. Alexander & Joseph E. Gagnon, 1990. "The global economic implications of German unification," International Finance Discussion Papers 379, Board of Governors of the Federal Reserve System (U.S.).
  4. Hall, Stephen G, 1993. " Modelling Structural Change Using the Kalman Filter," Economic Change and Restructuring, Springer, vol. 26(1), pages 1-13.
  5. Wyplosz, C., 1991. "A Note On the Real Exchange Rate Effect on German Unification," DELTA Working Papers 91-06, DELTA (Ecole normale supérieure).
  6. Charles Wyplosz, 1991. "On the real exchange rate effect of German unification," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 127(1), pages 1-17, March.
  7. Joseph E. Gagnon, 1989. "A forward-looking multicountry model: MX3," International Finance Discussion Papers 359, Board of Governors of the Federal Reserve System (U.S.).
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Citations

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Cited by:
  1. Robert Brooks & Robert Faff & David Sokulsky, 2005. "The stock market impact of German reunification: international evidence," Applied Financial Economics, Taylor & Francis Journals, vol. 15(1), pages 31-42.
  2. Beck, Martin & Winker, Peter, 2004. "Modeling spillovers and feedback of international trade in a disequilibrium framework," Economic Modelling, Elsevier, vol. 21(3), pages 445-470, May.
  3. John FitzGerald & Adele Bergin, 2004. "The Stability and Growth Pact: How much Co-ordination?," Papers WP153, Economic and Social Research Institute (ESRI).
  4. McKibbin, Warwick J. & Wilcoxen, Peter J., 2013. "A Global Approach to Energy and the Environment," Handbook of Computable General Equilibrium Modeling, Elsevier.

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