Germany · Julian Hinz

Dealing with Global Economic Challenges: An Agenda for the New Federal Government

Frank Bickenbach — Sat, 01 Feb 2025 00:00:00 +0000

An agenda for the new German federal government on the major global economic challenges. Germany must once again see itself as an important part of and a leading nation within the EU: completing the single market for digital products, financial services, and energy is the precondition for competing with the USA and China. Vis-à-vis China, the EU should reject compromise solutions such as minimum prices for electric vehicles and instead demand a reduction of unfair subsidies and better protection of European companies. Announced US tariffs threaten substantial losses for German exports; Europe should respond with unified countermeasures and higher defense investment. Beyond that, the brief argues for concluding trade agreements with regional partners, a strategic Africa policy built on long-term partnerships rather than migration deterrence, systematic monitoring of critical raw-material supply chains, and swift implementation of the EU emissions trading system.

What if? The Effects of a Hard Decoupling from China on the German Economy

David Baqaee — Mon, 15 Apr 2024 00:00:00 +0000

Cold turkey decoupling vs. gradual decoupling vs. gradual de-risking.

How would the German economy cope with a hard economic decoupling from China? We study a scenario where the global economy fragments into three distinct blocs: the G7 economies and their allies, China and her allies, as well as neutral countries. German trade with China would have to be entirely rerouted to countries within the “Western” block and neutral countries. We quantify the costs of such a worst-case hard decoupling using the Baqaee and Farhi (2021) multi-sector model of the world economy. Our key finding is that a total cut-off of trade relations with China would have severe but not devastating effects on the German economy. The welfare loss for Germany (relative to a no-cut-off baseline) would be around 5% of Gross National Expenditure (GNE) over the first few months and around 4% over the first year, plus additional short run costs due to business-cycle amplification effects. In the medium and long run, the costs would fall to a permanent loss in the 1-2% range. Less extreme decoupling or gradual de-risking scenarios (“small yard, high fence”) would incur smaller costs. The single most influential assumption relates to the “trade elasticity,” i.e., the ease and speed with which trade can be reorganized away from China to neutral countries and within the “Western” block. Our findings, in particular the critical dependence of economic costs on the time horizon over which adjustments take place, provide some rationale for embarking on a gradual de-risking trajectory to avoid a costly and politically contentious hard decoupling dictated by geopolitical events.

Was wäre wenn? Die Auswirkungen einer harten Abkopplung von China auf die deutsche Wirtschaft

David Baqaee — Mon, 01 Jan 2024 00:00:00 +0000

Wie würde die deutsche Wirtschaft eine harte wirtschaftliche Abkopplung von China bewältigen? Um dem nachzugehen, simulieren die Autoren mithilfe eines quantitativen Handelsmodels ein Szenario, in dem sich die Weltwirtschaft in drei Blöcke aufspaltet: die G7-Staaten und ihre Verbündeten, China mit seinen Verbündeten sowie neutrale Länder. Der Handel Deutschlands mit China müsste komplett auf Länder des “westlichen” Blocks und neutrale Staaten umgeleitet werden. Die Kosten einer solchen worst-case harten Entkopplung quantifizieren die Autoren mit dem Multisektor-Modell der Weltwirtschaft von Baqaee und Farhi (2021). Die zentrale Erkenntnis der Autoren ist, dass ein vollständiger Abbruch der Handelsbeziehungen mit China schwerwiegende, aber nicht katastrophale Auswirkungen auf die deutsche Wirtschaft haben würde.

An English version is What if? The Effects of a Hard Decoupling from China on the German Economy.

Effects of the AfCFTA for German and European Companies

Julian Hinz — Sat, 01 Oct 2022 00:00:00 +0000

In May 2019, the African Continental Free Trade Area (AfCFTA) agreement entered into force. In numerous respects, the AfCFTA can be considered a historic milestone towards trade liberalization on the African continent. Following ten rounds of official negotiations beginning in June 2015, the agreement now spans 55 African Union Member States of which 43 have already deposited their instruments of ratification. By connecting these economies, AfCFTA has become the largest trading bloc in the world in terms of market size, covering more than 1.3 billion consumers with combined GDP of USD 2.5 trillion. The AfCFTA’s core objective is to deepen the economic integration of the African continent by creating a single market for the movement of goods, services, capital and natural persons. In this study, we assess the status quo of trade within AfCFTA economies and between AfCFTA and EU economies, and outline three hypothetical future outcomes of AfCFTA for different levels of trade liberalization. The study was conducted with the support of Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH on behalf of the Federal Ministry for Economic Cooperation and Development (BMZ).

Après-ski: The Spread of Coronavirus from Ischgl through Germany

Gabriel Felbermayr — Tue, 30 Nov 2021 00:00:00 +0000

Observed vs. counterfactual confirmed cases on May 9, 2020.

The Austrian ski resort of Ischgl is commonly claimed to be ground zero for the diffusion of the SARS-CoV-2 virus across Germany. Drawing on data for 401 German counties, we find that conditional on geographical latitude and testing behavior by health authorities, road distance to Ischgl is indeed an important predictor of infection cases, but — in line with expectations — not of fatality rates. Were all German counties located as far from Ischgl as the most distant county of Vorpommern-Rügen, Germany would have seen about 48% fewer COVID-19 cases. A simple diffusion model predicts that the absolute value of the distance-to-Ischgl elasticity should fall over time when inter- and intra-county mobility are unrestricted. We test this hypothesis and conclude that the German lockdown measures have halted the spread of the virus.

Bodenbildung in der Binnenwirtschaft, Kollaps des Welthandels

Julian Hinz — Fri, 15 May 2020 00:00:00 +0000

Germany's economy in times of the Corona Lockdown

Julian Hinz — Wed, 15 Apr 2020 00:00:00 +0000