Causes and Effects
Edited by Ehtisham Ahmad, Massimo Bordignon and Giorgio Brosio
Chapter 4: Multi-level finance and the Euro crisis: the German experience
The financial crisis of 2008/09 had a severe and immediate impact on the German economy because of its high export dependency. Exports, which had grown by more than 10 per cent per annum in 2006 and 2007, produced a comparably weak rate of growth in 2008, and fell by 15 per cent in 2009. This resulted from financial uncertainties and poor growth performance in the economies of Germany’s trading partners. But export growth resumed vigorously after the peak crisis year, to level out only more recently – again mirroring the dynamics of growth in important economies, notably in Asia and the European Union. What is often overlooked, however, is the fact that exports and imports of goods and services are positively correlated in Germany. From 2004 to 2012 the import elasticity of export growth was 1.095, indicating that German exports trigger a more than proportional response of imports from its trading partners, both positive (when growing) and negative (during crisis). True, German net exports, which had reached an all-time high in US dollar terms just before the crisis, experienced a sharp decline in 2009, but they recovered strongly afterwards.
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