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Whither Germany and the EMU In a Challenging Environment?

Author

Listed:
  • Lila J. Truett

    (University of Texas at San Antonio)

  • Dale B. Truett

    (University of Texas at San Antonio)

Abstract

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 the 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 labor and imports. Our findings indicate that the input pairs of capital-labor and labor-imports are substitutes. The substitutes relationship between labor and imports, which has become stronger over time, suggests that increasing globalization 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.

Suggested Citation

  • Lila J. Truett & Dale B. Truett, 2011. "Whither Germany and the EMU In a Challenging Environment?," Working Papers 0019, College of Business, University of Texas at San Antonio.
    • Handle: RePEc:tsa:wpaper:0050eco
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    More about this item

    Keywords

    Globalization; Germany;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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