We have not presented the case of Germany because of the change in real GDP time series in 1989. However, the historical time series does not differ from those in other developed countries. Figure 1 shows that real GDP per capita, G, in Germany also has two branches – before and after 1940. The Total Economy Database (TEDI) gives two estimates for Germany – for West Germany only, which goes back into the 1950s, and for Germany since 1989. We have plotted the West Germany time series since it is different from the historical time series which is identical to Germany after 1989.
As expected, G follows a linear trend in the long run:
G(t) = At + C (1)
Currently, real GDP in Germany is on the trend line. This means no output gap. We also predicted a recession in Germany.
Figure 1. The evolution of real GDP per capita in Germany between 1871 and 2011