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

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

This study reviews 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 reasonably accurate guides to the direction and magnitude of the effects of unification on key macroeconomic variables. 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. The model simulations also highlighted contractionary effects of high German interest rates on EMS countries.

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File URL: http://www.sciencedirect.com/science/article/B6VB1-3VWTBDK-1/2/05cb39082b4fa9f0bf3f3a15b85417ac
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Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 13 (1996)
Issue (Month): 4 (October)
Pages: 467-497

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Handle: RePEc:eee:ecmode:v:13:y:1996:i:4:p:467-497
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30411

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  1. Mckibbin, W.J., 1990. "Some Global Macroeconomic Implications Of German Unification," Papers 81, Brookings Institution - Working Papers.
  2. 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.).
  3. 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.
  4. Wyplosz, C., 1991. "A Note On the Real Exchange Rate Effect on German Unification," DELTA Working Papers 91-06, DELTA (Ecole normale supérieure).
  5. Hall, Stephen G, 1993. " Modelling Structural Change Using the Kalman Filter," Economic Change and Restructuring, Springer, vol. 26(1), pages 1-13.
  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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