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Journal of Economic Integration 2021 September;36(3) :339-371.
DOI: https://doi.org/10.11130/jei.2021.36.3.339
Determinants of German and Japanese Exports: A Comparative Study

George K. Zestos1 Yixiao Jiang 1 and Clifton Painter 1

1Christopher Newport University, USA
Corresponding Author: George K. Zestos ,Email: gzestos@cnu.edu
Copyright ©2021 Journal of Economic Integration
ABSTRACT
This study investigates the determinants of German and Japanese exports in a comparative fashion. By estimating an autoregressive distributed lag model for each country, we find that the income elasticity of Japanese exports is three times as large as that of Germany’s exports. This relative insensitivity to external demand explains why Germany has maintained its export growth whereas Japanese exports started to stagnate after the global financial crisis. Because Germany adopted the euro in 1999, it was able to maintain large trade surpluses. If Germany had instead kept the Deutsche Mark (DM), the DM would have appreciated owing to the Central Bank of Germany’s consistent preference for a tight monetary policy, and Germany’s trade surpluses would have dissipated. A sharp increase in Japanese foreign direct investment after 2011 has also played a role in reducing Japanese exports after the global financial crisis.

JEL Classification
C22: Time Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
F14: Empirical Studies of Trade
F15: Economic Integration
O57: Comparative Studies of Countries
Keywords: Autoregressive distributed lag model | Export-led growth | Cointegration | Economic development
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