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Identifying Determinants of Germany's International Price Competitiveness: A Structural VAR Approach

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  • Martin Meurers

Abstract

The paper employs a structural vector auto-regression (SVAR) along the lines of Blanchard and Quah (1989) and Clarida and Gali (1994) to identify the sources of changes in German international price competitiveness over the past 30 years. This leads to a separation of the driving forces of the real exchange rate into real demand, supply, and nominal shocks. Based on this decomposition, it is analysed whether real exchange rate changes have helped to stabilise output in the post re-unification period and whether such changes have facilitated the ongoing structural adjustment process of the German economy. The results indicate that real demand and nominal shocks have been the main drivers of the real exchange rate in the past, whereas output fluctuations have been almost entirely due to supply shocks. In particular, it turns out that improvements of Germany’s price competitiveness in the second half of the 1990s have been primarily the result of a relative domestic demand restraint and hardly that of supply side expansions. Recherche des déterminants de la compétitivité-prix internationale de l'Allemagne à partir d'un modèle vectoriel autorégressif (VAR) structurel Dans la lignée de Blanchard et Quah (1989) et de Clarida et Gali (1994), les auteurs s’appuient sur un modèle vectoriel autorégressif structurel (SVAR) pour déterminer l’origine des variations de la compétitivité-prix internationale de l’Allemagne ces 30 dernières années. Cette méthode permet de décomposer les forces agissant sur le taux de change réel en chocs sur la demande réelle, en chocs sur l’offre et en chocs nominaux. À partir de cette décomposition, on se demande si les variations du taux de change réel ont contribué à stabiliser la production durant la période postérieure à l’unification et si elles ont facilité l’ajustement structurel en cours de l’économie allemande. Les résultats montrent que les chocs sur la demande réelle et les chocs nominaux sont les principaux facteurs qui ont influé sur le taux de change réel dans le passé, alors que les fluctuations de la production sont dues presque entièrement aux chocs sur l’offre.

Suggested Citation

  • Martin Meurers, 2006. "Identifying Determinants of Germany's International Price Competitiveness: A Structural VAR Approach," OECD Economics Department Working Papers 523, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:523-en
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    File URL: http://dx.doi.org/10.1787/407563327012
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    Cited by:

    1. Levent, Korap, 2007. "Structural VAR identification of the Turkish business cycles," MPRA Paper 21971, University Library of Munich, Germany.

    More about this item

    Keywords

    compétitivité internationale de l'Allemagne; décomposition historique; German international competitiveness; historical decomposition; real exchange rates; SVAR; système vectoriel auto-régressif structurel; taux de change réel;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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