Tests of German Resilience

Author/Editor: Fabian Bornhorst ; Ashoka Mody
Publication Date: October 02, 2012
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
Summary: From its early post-war catch-up phase, Germany’s formidable export engine has been its consistent driver of growth. But Germany has almost equally consistently run current account surpluses. Exports have powered the dynamic phases and helped emerge from stagnation. Volatile external demand, in turn, has elevated German GDP growth volatility by advanced countries’ standards, keeping domestic consumption growth at surprisingly low levels. As a consequence, despite the size of its economy and important labor market reforms, Germany’s ability to act as global locomotive has been limited. With increasing competition in its traditional areas of manufacturing, a more domestically-driven growth dynamic, especially in the production and delivery of services, will be good for Germany and for the global economy. Absent such an effort, German growth will remain constrained, and Germany will play only a modest role in spurring growth elsewhere.
Series: Working Paper No. 12/239
Subject(s): Economic growth | Germany | Exports | Export competitiveness | Labor markets | Economic recession | Economic recovery | Spillovers

Publication Date: October 02, 2012
ISBN/ISSN: 9781475511307/1018-5941 Format: Paper
Stock No: WPIEA2012239 Pages: 27
US$18.00 (Academic Rate:
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