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I'd really question the price-elasticity numbers because there doesn't seem to be enough comparative data to generate them accurately.

As such, a lot of the talk about Germany's ability to remain an export champion at higher exchange rates is largely either:

  • naive extrapolation from a simpler time (W. Germany)

  • macho myth making rooted in a belief that price doesn't matter if quality is high enough. That's true for some sectors and segments of other sectors, but when you add all that up, it's a smaller market than people think.

  • ignorance of the new world of global trade. The key point here is that to remain competitive companies (e.g. Mercedes Benz) have developed factories in other parts of the world (e.g. USA, China) and the profits from those factories may stay constant, but their value on the company balance sheet changes if the exchange rate moves up. Nobody I know of has written about this regarding Germany, but there are some commentaries on Japan (particularly Sony) that highlight how this causes problems.
by Metatone (metatone [a|t] gmail (dot) com) on Sun Dec 1st, 2013 at 05:46:34 AM EST
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