The euro exchange rate and Germany's trade surplus
CESifo, Munich, 2019
CESifo Working Paper No. 7543
![](https://cesifo.org/DocImg/cesifo1_wp7543.jpg?c=1689237195)
We estimate a three-region (DE-REA-RoW) structural macroeconomic model, and we provide a counterfactual on how nominal exchange rate flexibility would have affected the German trade balance (TB) by simulating the shocks of the estimated model under a counterfactual flexible exchange rate regime. The actual and counterfactual TB trajectories are similar overall. Results suggest an around 2 pp lower trade surplus during 2012-15 together with a stronger real effective exchange rate in the counterfactual. The latter shows a similar upward trend in the TB, however, and the 2012-15 gap between actual and counterfactual closes at the end of the sample.
Monetary Policy and International Finance
Fiscal Policy, Macroeconomics and Growth
Empirical and Theoretical Methods