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Economic Implications of German Unification for the Federal Republic and the Rest of the World

Author

Listed:
  • Mr. Paul R Masson
  • Mr. Guy M Meredith

Abstract

The economic effects of German unification are first discussed in the context of a global saving/investment model. Next, simulations of MULTIMOD are presented, suggesting for the FRG an initial increase in long-term real interest rates equal to 3/4 of a percentage point, increased output, a temporary half-point rise in inflation, a modest real appreciation of the deutsche mark, and a reduction of the (combined GDR and FRG) current account surplus equal to 2 percent of GNP. Effects on the rest of the world seem to be relatively small. Different policies are examined within the EMS, and other simulation studies are surveyed.

Suggested Citation

  • Mr. Paul R Masson & Mr. Guy M Meredith, 1990. "Economic Implications of German Unification for the Federal Republic and the Rest of the World," IMF Working Papers 1990/085, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1990/085
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