West Germany: the dynamics of expansion

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Abstract
During more than two decades, West German foreign economic policy has served a strategy of export-oriented growth. The success of this strategy is based on a number of factors, such as Germany's industrial structure, a favorable international environment, a pro-investment domestic economic policy and the constructive role of labor in postwar economic development. Decision making in foreign economic policy is characterized by the dominance of the export sector. The strategy of export expansion met withobstacles in two areas. In Eastern trade policy export interests clashed with the imperatives of “high politics” during the Cold War era. In monetary policy, the chronic undervaluation of the Deutsche Mark, a crucial factor of export competitiveness, collided with the goal of price stability. Both cases highlight the limits of export sector dominance. In recent years, the internationalization of German industry and the process of structural change have created problems that suggest that theGerman economy is reaching the limits of export-oriented growth. These pose new challenges to economic policy makers.

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