Premium
WHITHER GERMANY AND THE EMU IN A CHALLENGING ENVIRONMENT? *
Author(s) -
TRUETT LILA J.,
TRUETT DALE B.
Publication year - 2012
Publication title -
australian economic papers
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.351
H-Index - 15
eISSN - 1467-8454
pISSN - 0004-900X
DOI - 10.1111/j.1467-8454.2012.00422.x
Subject(s) - economics , unemployment , capital (architecture) , unification , german , german economy , european union , globalization , production (economics) , member states , international economics , labour economics , macroeconomics , market economy , archaeology , computer science , programming language , history
While the German economy may currently be a bright spot in Europe, it has faced substantial challenges in recent years. Moreover, tensions are rising regarding Germany's responsibilities and opportunities as a member of the European Monetary Union. Other studies have documented the difficulties that Germany has encountered as a result of the unification and further integration of Europe. This paper adds to that literature by using an aggregate translog cost function approach to examine the relationships among inputs of domestic capital and labour and imports. Our findings indicate that the input pairs of capital‐labour and labour‐imports are substitutes. The substitutes relationship between labour and imports, which has become stronger over time, suggests that increasing globalisation will add to Germany's unemployment woes. Capital and imports appear to be weak complements, but that relationship is not statistically significant. The results also suggest that imports are playing an increasingly important role in Germany's aggregate production, accentuating the role of the international environment.