Trade and Economic Growth in Germany

The nexus between trade and economic growth in Germany has been widely debated given to the high economic status compared to most countries in the world. This paper investigates the relationship between exports, imports, and economic growth in Germany. In order to achieve this purpose, annual data were collected from the reports of World Bank for the periods between 1985 and 2015, was tested by using Augmented Dickey-Fuller (ADF) and Phillip-Perron (PP) stationary test, co integration analysis of Vector Auto Regression Model and the Granger-Causality tests. According to the result of the analysis, unit root tests show that economic growth, exports and imports series become stationary when first difference is considered. Also, it was determined by using co integration analysis of Vector Auto Regression Model that there is no relationship between the three variables in Germany. On the other hand, and according to the Granger-Causality tests, we defined that there is unidirectional causality between exports and imports and between exports and economic growth. In addition, we found that there is a strong evidence of bidirectional causality from import to economic growth. These results provide evidence that exports and imports, thus, are seen as the source of economic growth in Germany