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International spillovers and feedback: modelling in a disequilibrium framework

  • Winker, Peter
  • Beck, Martin

German unifikation hit the West German economy in a prosperous and appeared as a huge demand shock at least for the first few quarters. This combination resulted in a major increase of imports from the main trading partners of West Germany, which may have helped to cushion recessionary trends within these countries. In this paper the modelling of international trade in a disequilibrium framework and the consequences of German unification on trade flows are in the centre of interest. For this purpose, a macroeconomic disequilibrium model for the German economy is extended by submodels for bilateral trade flows vis a vis major trading partners. These submodels treat the trade flows as well as foreign and domestic production and capacity utilization as edogenous in a vector error correction framework. Consequently, the model allows for spillovers, like those resulting from the demand shock of German unification, to effect not only German trade flows, but also real variables in other countries leading to a feedback on Germany. The paper provides a short overview over the basic model. The modelling approach and estimation results for the trade submodels are presented in some detail and simmulation results for the feedback effects are also included.

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Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 00-36.

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Date of creation: 2000
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Handle: RePEc:zbw:zewdip:5319
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  1. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  2. Johansen, Soren, 1992. "Determination of Cointegration Rank in the Presence of a Linear Trend," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 383-97, August.
  3. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
  4. Winker, Peter & Smolny, Werner & Radowski, Daniel, 1999. "Modeling German unification in a disequilibrium framework," ZEW Discussion Papers 99-61, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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