The impact of aggregate demand shocks on Germany’s trade balance and industry

Lebogang Mateane, Christian R. Proaño and Fabio E.G. Röhrer

Applied Economics Letters, 2025, vol. 32, issue 7, 980-986

Abstract: We examine the impact of aggregate demand shocks on Germany’s trade balance and industry after the adoption of the Euro. Using a Structural Vector Autoregression we find that Germany’s trade balance and industry are highly responsive to aggregate demand shocks. As Germany’s income increases, this leads to an increase in imports and a gradual reduction in its trade balance. However, Germany’s export capacity stabilizes its trade balance. This is over a period of rapid globalization, technological progress confronting all economies, several global trade disruptions and with disturbances to crucial energy requirements for Germany’s industry and export sector.

Date: 2025
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DOI: 10.1080/13504851.2023.2298417

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