Abstract
Abstract This paper estimates a three-region macroeconomic model to analyse the key drivers of Germany’s GDP, inflation, and wage growth during the COVID-19 pandemic and inflation surge. Incorporating COVID-related demand and supply shocks, trade in commodities, and endogenous ELB periods, the results highlight that (i) the 2020–2021 downturn was primarily driven by domestic and global lockdown shocks, (ii) the 2021–2022 inflation surge resulted from rising commodity prices, recovering global demand, and supply-side pressures, and (iii) wage growth per hour was shaped by opposing demand and supply forces. The model’s estimated shocks closely align with external indicators, supporting its empirical plausibility.
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