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Poetry and Truth: Germany’s Position on Unit Labour Costs, External Trade and Real Exchange Rates in the Eurozone – What do the Statistics Say?

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  • Georg Erber

Abstract

Georg Erber, German Institute for Economic Research (DIW), Berlin, investigates the statistical data available on real unit labour costs, external trade and the real effective exchange rates of EU countries, as well as further countries in the world economy, and shows the extent to which the statistics available support the assertion that Germany has gained the most from monetary union. An analysis of the data available raises significant doubts in this respect. On the one hand, fluctuations in real unit labour costs show that there has been no sustained trend. Furthermore, it emerges that Germany’s enhanced price competitiveness did not lead to the anticipated disproportionate increase in Germany’s exports due to a small increase in unit labour costs. Instead, Germany’s exports to countries outside the Eurozone increased significantly more than to countries within it. Measured in terms of the real effective exchange rate, a clear increase in price competitiveness only played a minor role. Specialisation in capital goods and long-term consumer durables, as well as high quality standards and innovation are far more critical competitiveness factors.

Suggested Citation

  • Georg Erber, 2012. "Poetry and Truth: Germany’s Position on Unit Labour Costs, External Trade and Real Exchange Rates in the Eurozone – What do the Statistics Say?," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 65(05), pages 20-34, March.
    • Handle: RePEc:ces:ifosdt:v:65:y:2012:i:05:p:20-34
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    References listed on IDEAS

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    1. Buch, Claudia M. & Piazolo, Daniel, 2001. "Capital and trade flows in Europe and the impact of enlargement," Economic Systems, Elsevier, vol. 25(3), pages 183-214, September.
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    1. Erber, Georg & Hagemann, Harald, 2012. "Wachstums- und Investitionsdynamik in Deutschland," Violette Reihe: Schriftenreihe des Promotionsschwerpunkts "Globalisierung und Beschäftigung" 36/2012, University of Hohenheim, Carl von Ossietzky University Oldenburg, Evangelisches Studienwerk.

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