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The impact of aggregate demand shocks on Germany’s trade balance and industry

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  • Lebogang Mateane
  • Christian R. Proaño
  • Fabio E.G. Röhrer

Abstract

We examine the impact of aggregate demand shocks on Germany’s trade balance and industry after the adoption of the Euro. Using a Structural Vector Autoregression we find that Germany’s trade balance and industry are highly responsive to aggregate demand shocks. As Germany’s income increases, this leads to an increase in imports and a gradual reduction in its trade balance. However, Germany’s export capacity stabilizes its trade balance. This is over a period of rapid globalization, technological progress confronting all economies, several global trade disruptions and with disturbances to crucial energy requirements for Germany’s industry and export sector.

Suggested Citation

  • Lebogang Mateane & Christian R. Proaño & Fabio E.G. Röhrer, 2025. "The impact of aggregate demand shocks on Germany’s trade balance and industry," Applied Economics Letters, Taylor & Francis Journals, vol. 32(7), pages 980-986, April.
    • Handle: RePEc:taf:apeclt:v:32:y:2025:i:7:p:980-986
    DOI: 10.1080/13504851.2023.2298417
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