DP1508 International Implications of German Unification
|Publication Date:||November 1996|
|Keyword(s):||Direct Investment, Joint Ventures, Privatization, Transformation Economies|
|Programme Areas:||Financial Economics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=1508|
This paper advances the hypothesis that the EMS crisis was caused by German unification. Unification stimulated massive resource demand, which paralleled resource demand in the United States following Reagan?s tax reforms in the 1980s. The resource demand revised German interest rates relative to the rest of the world, which brought about devaluations of other European currencies. The paper identifies those European currencies needing revaluation before they can join the European currency union.