ABSTRACT
German unification has many economic consequences which are of great importance not only for Germany itself but also for European as well as non-European countries. One central issue concerning the external economic relations of the united Germany should be addressed: how will the process of integration of the two parts of Germany affect the external value of the deutschmark? This question has a short-and long-run dimension. In particular, the long-run development of the exchange rate of the deutschmark is essential for Germany’s future competitiveness, and thus, for the development of the current account. It is also important for forming (more or less) rational exchange-rate expectations which influence the direction and volume of capital flows to and from Germany and, thus, affect the capital account. Last but not least, the future development of the deutschmark will not be without influence on the European Monetary System (EMS) and on the integration process towards a European Monetary Union (EMU).
