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This study reviews early simulations of the effects of German unification using three different rational-expectations multi-country models. Despite significant differences in their structures and in the implementations of the unification shock, the models delivered a number of common results that proved reasonably accurate guides to the direction and magnitude of the effects of unification on key macroeconomic variables. Unification was expected to give rise to an increase in German aggregate demand that would put upward pressure on output, inflation, and the exchange rate, and downward pressure on the current account balance. The model simulations also highlighted contractionary effects of high German interest rates on EMS countries.

Aggregate Factor Income Distribution --- Banks and Banking --- Currency --- Deflation --- Exchange rates --- Finance --- Financial services --- Fiscal Policy --- Fiscal policy --- Fiscal stimulus --- Foreign Exchange --- Foreign exchange --- Income --- Inflation --- Interest rates --- Interest Rates: Determination, Term Structure, and Effects --- International Economic Order and Integration --- Macroeconomics --- Model Evaluation and Selection --- National accounts --- Price Level --- Prices --- Short term interest rates --- Germany

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This paper explores the effects of unconventional monetary and exchange rate policies. We find that official foreign asset purchases have large effects on current accounts that diminish as capital mobility rises and spill over to financially integrated countries. There is an additional effect through the stock of central bank assets. Domestic asset purchases have an effect on current accounts only when capital mobility is low. We also find that rising US bond yields drive foreign yields, stock prices and depreciations, but less so on days of policy announcements. We develop a theoretical model that is broadly consistent with our results.

Monetary policy. --- Foreign exchange rates. --- Exchange rates --- Fixed exchange rates --- Flexible exchange rates --- Floating exchange rates --- Fluctuating exchange rates --- Foreign exchange --- Rates of exchange --- Monetary management --- Economic policy --- Currency boards --- Money supply --- Rates --- Exports and Imports --- Foreign Exchange --- Investments: Bonds --- Money and Monetary Policy --- Current Account Adjustment --- Short-term Capital Movements --- Monetary Policy --- General Financial Markets: General (includes Measurement and Data) --- International economics --- Monetary economics --- Investment & securities --- Currency --- Current account --- Unconventional monetary policies --- Bond yields --- Current account balance --- Balance of payments --- Monetary policy --- Financial institutions --- Bonds --- United States