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Forex Flash: Germany yields more trade benefits than EU periphery – Goldman Sachs

Peripheral economies benefit from final demand in China less than Germany does. Through Germany’s own direct and indirect trade linkages, we find that its output is more dependent on Chinese final demand than is suggested by direct bilateral trade. For Germany, China ranks alongside France, Italy and the UK as a destination for its exported value added.

According to the Economics Research Team at Goldman Sachs, “One of the remaining ways in which the very easy monetary policy stance established by the ECB can support the periphery is via the exchange rate.” Despite the low direct exposure to extra-Euro area demand, the periphery nevertheless received stimulus. Yet the fact that activity is more sensitive to extra-Euro area demand in Germany than it is in the periphery makes area-wide monetary policy an ineffective tool for targeting support where it is most needed.

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