10 Macroeconomic Consequences of German Unification
Author:
Mr. Jacob A. Frenkel https://isni.org/isni/0000000404811396 International Monetary Fund

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Mr. Morris Goldstein https://isni.org/isni/0000000404811396 International Monetary Fund

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Language:
English
Print Publication Date:
24 Apr 1996
Keywords:
BOOK; exchange rate; nominal interest rate; EC country; deutsche mark; policy rule; exchange-rate crisis; Exchange rates; Real exchange rates; Currencies; Inflation; Global; Europe; Asia and Pacific; North America; Middle East

Abstract

Simulation of the reference scenario in MULTIMOD suggests that GEMSU might produce an increase of long-term real interest rates equal to three fourths of 1 percent. An alternative tax policy that increases VAT by 2 percent leads to a similar path, with lower real interest rates but higher inflation. The simulation also suggests that the deutsche mark is likely to appreciate in real terms against other currencies as a result of GEMSU. Effects on other industrial countries will not be large, as the negative demand effects of higher interest rates and positive stimulus from higher imports of eastern Germany roughly offset.

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Cover Functioning of the International Monetary System
Functioning of the International Monetary System
ISBN:
9781557755544
Publication Date:
24 Apr 1996
Publisher:
International Monetary Fund
DOI:
https://doi.org/10.5089/9781557755544.071
Pages:
507