Germany: Bundesbank Monthly Report: Germany’s competitive position and foreign trade within the euro area

Author (Corporate)
Publisher
Series Title
Series Details October 2003
Publication Date 01/10/2003
Content Type , ,

Joining monetary union represented a major turning point for the German economy. The introduction of the euro means that foreign trade with euroarea partner countries can now be conducted in a common currency. As a result, there are no longer any exchange rate risks, and transaction costs are reduced. The launch of monetary union therefore promised a further increase in trade with the other countries of the euro area. Besides creating trade, monetary union is also expected to redirect trade. Enterprises may find it more (cost-)effective to substitute intra-EMU trade for some of the trade previously conducted with non-euroarea countries. However, the empirical findings on German foreign trade in the first four and a half years of monetary union only partially substantiate these lines of reasoning. There has indeed been quite sharp growth in Germany's trade with its EMU partners since 1999, but the increase in trade with countries outside the euro area has been even greater. When these findings are being interpreted, however, due account has to be taken of the fact that growth differentials and shifts in price competitiveness have mainly stimulated trade in goods with non-euro-area countries

Source Link Link to Main Source http://www.bundesbank.de/download/volkswirtschaft/mba/2003/200310_en_competitive.pdf
Countries / Regions