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The Economy of East and West Germany

Macroeconomic Simulations until 2005

Gerhard Gehrig

This publication contains the final results of an econometric research based on a model generator. It shows the complete system of models for West and East Germany. With this system of models simulations have been performed with a basic and an optimistic scenario to show the economic development in both parts of the FRG until the year 2005. Interesting conclusions for improving economic policy in developing East Germany and for keeping the social market economy alive in the long run can be derived by the results and the comparison of these model applications. The publication should encourage politicians to tackle future economic difficulties much more by means of econometric models than in the past which would help to avoid economic failures. Using econometric models is an important precondition for not overtaxing the economy and for an efficient development of the Neue Länder at the same time.
Contents: Econometric models of markets for commodities, money and capital and labour in East and West Germany - Basic and optimistic simulation until the year 2005, commented scenarios and selected results - Conclusions on taxation, Euro currency, social market economy etc.