Front Matter

Front Matter

International Monetary Fund
Published Date:
December 1990
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    Occasional Paper No. 75

    German Unification

    Economic Issues

    Edited by Leslie Lipschitz and Donogh McDonald

    International Monetary Fund

    Washington, D.C.

    December 1990

    © 1990 International Monetary Fund

    Reprinted 1993

    Library of Congress Cataloging-in-Publication Data

    German unification : economic issues / edited by Leslie Lipschitz and Donogh McDonald.

    p. cm. — (Occasional paper / International Monetary Fund ISSN 0251-6365 ; no. 75)

    “December 1990.”

    Includes bibliographical references.

    ISBN 1-55775-200-1

    1. Germany (West)—Economic Policy—1974- 2. Germany (West)—Economic conditions—1974- 3. Germany (East)—Economic policy. 4. Germany (East)—Economic conditions.

    I. Lipschitz, Leslie. II. McDonald, Donogh. III. Series: Occasional paper (International Monetary Fund) ; no. 75.

    HC286.7.G447 1990




    Price: US$10.00

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    The following symbols or terms have been used throughout this publication:

    • … to indicate that data are not available:

    • — to indicate that the figure is zero or less than half the final digit shown, or that the item does not exist:

    • – between years or months (e.g., 1989–90 or January–June) to indicate the years or months covered, including the beginning and ending years or months: between years (e.g., 1985/86) to indicate a crop or fiscal (financial) year.

    “Billion” means a thousand million.

    “Trillion” means a thousand billion.

    Lander are the states of the Federal Republic of Germany: DM denotes deutsche mark, the currency of the Federal Republic of Germany: M denotes marks, the currency of the former German Democratic Republic: GNP is gross national product; GDP is gross domestic product; and NMP is net material product.

    Minor discrepancies between constituent figures and totals are due to rounding.


    In January 1989 three of the authors of this volume were involved in the publication of a shorter paper entitled The Federal Republic of Germany: Adjustment in a Surplus Country. Some readers of that paper were surprised by its forthrightness. The Financial Times of London, noting that the IMF “pulls no punches in its criticism” and marveling at “Bonn’s policy of openness” at agreeing to publication, characterized it as “a fit of glasnost” by the International Monetary Fund. In fact, the German authorities had been most helpful in the preparation of the paper and had never tried to stifle the criticism in it; neither they nor their representatives at the IMF had questioned the authors’ decision to publish the paper.

    The present volume comes at an even more interesting time. The papers, written initially for distribution within the IMF, afforded the authors the privilege of being close witnesses to historical changes in Germany, and forced them to try and stand apart from the euphoria of the unification process and evaluate its implications. The authors are enormously indebted to many public officials in Germany, who, despite considerably increased work loads, took great pains to enlighten and inform, to answer many questions, and to correct factual and technical errors. But the discussions with German officials did more: they transmitted to the authors some of the enthusiasm—the sanguine, almost heady, atmosphere—that was the context of German economic policymaking in 1990.

    The rapid pace of developments in Germany, coupled with the inevitable time lag between preparation and publication, presents two problems. First, the data in the paper generally represent the available estimates and projections at the end of September or early October 1990—much of this will probably be out of date by the new year. The second problem is one of terminology: the area called the German Democratic Republic (GDR) became part of the Federal Republic of Germany (FRG) on October 3, 1990. In general, the designation GDR is used in referring to the pre-unification period and east Germany (as distinct from west Germany) to the post-unification period. Similar problems exist with currencies: GDR marks ceased to exist as legal tender on July 1 and deutsche mark became the sole legal tender in the FRG and the GDR. The authors take some pains to avoid confusion in these terms, but it is not always easy.

    The responses to the earlier paper on Germany influenced the structure of this volume. On that occasion, in an attempt to keep the paper slim, the arguments were buttressed with references to various unpublished background notes. Many readers, however, wanted the whole picture, and were quick to request copies of these notes. For this reason the present volume is more comprehensive. While in form it resembles a conference volume (authors are listed for each paper), the extent of cooperation, review, and criticism from within the team was much greater than is apparent. In addition, the authors are indebted to Manuel Guitián (who led the 1990 IMF consultation mission to Germany) and to many other colleagues for helpful suggestions and comments, to Behrouz Guerami and Jolanta Stefanska for research assistance, to Esha Ray for editorial assistance, and to Valerie Pabst and Marie Ricasa for secretarial support. The authors bear sole responsibility for any factual errors. The opinions expressed are those of the authors and should not be construed as representing the views of the German authorities, Executive Directors of the IMF, or other members of the IMF staff.

    Federal Republic of Germany and German Democratic Republic: Comparison of Selected Economic and Social Indicators in 1988


    of Germany


    Area and population
    Area (1,000 sq. km.)249108
    Population (millions)61.416.7
    (In percent of population)
    Of working age67.0165.0
    Total employed (millions)27.49.0
    (In percent of population)44.553.9
    Female employment (in percent of total employment)38.1148.6
    Employment by sector
    (In percent of total)
    Agriculture and forestry4.010.8
    Mining, manufacturing, and construction39.847.1
    Other sectors56.242.1
    Household income, consumption, and saving
    Average monthly gross earnings (DM/M)3,8501.270
    Household saving (in percent of disposable income)12.87.1
    Households with:
    (In percent of total)
    Color television9452
    Production, investment, and prices
    (Annual real growth rate, 1980–88)
    Gross fixed investment0.72.0
    Of which: Machinery and equipment2.45.0
    Consumer prices (annual percent rate of change, 1980–88)2.9
    External trade in goods
    (In percent of total exports)
    Exports to state-trading countries4.469.5
    Imports from state-trading countries4.768.7
    Trade balance
    (In percent of GNP/NMP)6.01.0
    Of which: State-trading countries0.21.0
    Monetary accounts of households
    Household financial assets3 (billions DM/M)1,196.6167.2
    Velocity of money41.110.97
    Sources: Statistisches Bundesamt, Statistisches Jahrbuch der Bundesrepublik Deutschland, 1989; Staatliche Zentralverwaltung für Statistik der DDR, Statistisches Jahrbuch der DDR, 1989; and Deutsche Bundesbank.



    Currency and bank deposits. Year-end for the FRG and year average for the GDR.

    Private disposable income divided by household financial assets.

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