Growth performance in France and Germany a comparison

Transcription

1 Growth performance in France and Germany a comparison Gustav Horn/Heike Joebges 19. June 2008 IMK/OFCE conference

2 Outline Stylized facts Tentative assessments 1 Statistical insights Tentative assessments 2 Concluding remarks

3 Stylized facts 1 Weaker growth in Germany since the euro introduction 140 GDP,1991=100, real DE FR

4 Stylized facts 2 due to stagnating domestic demand in Germany 140 Domestic demand, 1991=100, real DE FR

5 Stylized facts 3 that could not be compensated for by strong German export growth (while import developments were similar). 280 Exports, 1991=100, real DE FR

6 Stylized facts 4 Weak German internal demand is reflected in private consumption 140 Private consumption, 1991=100, real DE FR

7 Stylized facts 5 as well as in government consumption 200 Government consumption, 1991=100, nom DE FR

8 Stylized facts 6 as well as in investment. Gross fixed capital formation, 1991=100, real DE FR

9 Stylized facts 7 Wages and salaries (as well as employment) growth explains the differing developments in private consumption. 180 Wages and salaries, 1991=100, nom DE FR

10 Stylized facts 8 Yet, labor productivity hardly differs between the two countries! 140 Labour productivity per hour,1991= DE FR

11 Stylized facts 9 Short term & long term interest rates differ only slightly. 10 Short term interest rates, real (Interbank rates, 3m, CPI deflated) DE FR

12 Stylized facts 10 Per capita growth differences are smaller. 130 GDP per inhabitant, 1991=100, real DE FR (yearly data)

13 Tentative assessments 1 for the period after the introduction of the euro: Wage developments in Germany did play a role in dampening domestic demand, while promoting growth in France. For both countries, GDP growth effects of wage developments via competitiveness were smaller than those via consumption. Fiscal activity (consumption and investment) contributed to the growth difference between France and Germany.

14 Tentative assessments 1ff for the period after the introduction of the euro: Monetary policy cannot fully explain the differing growth rates. Yet, it shows the high levels for Germany (relative to GDP growth) and it might indicate why the recent expansion started later in Germany than in France. The smaller growth difference per capita is due to a stagnating/decreasing population in Germany (from 2003 onwards).

15 Statistical insights The real GDP difference between Germany and France is instationary (I(1))! for 1991Q1-2007Q4 and for 1999Q1-2007Q4 The same holds for the differences of the following explanatory candidates: Government consumption/investment (incl. the GDP-shares) Real interest rates (long & short) Unit labor costs (ECB) Wage share Compensation per employee Real effective exchange rate (OECD) Competitiveness indicator (ECB)

16 Tentative assessments 2 Despite European Monetary Integration, France and Germany s GDP development do follow different stochastic trends. Even though this has in part to be attributed to the short sample, it may indicate problematic divergent growth paths within the common currency area. If the recent stronger upturn in Germany will contribute to a harmonization of growth developments of the two countries, remains to be seen.

17 Concluding remarks Since the start of EMU, domestic demand has (until recently) been the driver of higher growth in France than in Germany. A better export performance in Germany has (until recently) not compensated for the stagnating domestic demand. The diverging developments in domestic demand are reflected in all components: government and private consumption, and gross fixed investment. The discrepancy in private consumption is not surprising: wages and salaries as well as employment expanded in France, while they stagnated in Germany. If the recent upturn in Germany will contribute to less divergent growth developments remains to be seen.

18 Thank you for your attention!