German Unification - What Have We Learned from Multi-Country Models?
AbstractThis 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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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 96/43.
Date of creation: 01 May 1996
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Other versions of this item:
- Gagnon, Joseph E. & Masson, Paul R. & McKibbin, Warwick J., 1996. "German unification: What have we learned from multi-country models?," Economic Modelling, Elsevier, vol. 13(4), pages 467-497, October.
- Joseph E. Gagnon & Paul R. Masson & Warwick J. McKibbin, 1996. "German unification: what have we learned from multi-country models?," International Finance Discussion Papers 547, Board of Governors of the Federal Reserve System (U.S.).
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