incomes in the east have now reached the western level, and investment per capita has been much higher than in the west …. However, every third deutschmark spent in the east has been coming from the west, investment in equipment has fallen below the … west Germany. Excessively high wages coupled with investment incentives that made the cost of capital negative rank high …

, firms make their export decisions and choose how much to invest. Investment is financed through one period loans from … increase in exports, and (iii) a large decline in investment. These real effects are consistent with the evidence for the …

. This model generates dynamic relationships between foreign capital inflows, domestic investment and domestic bank debt in … accumulation of bank debt and increasing concentration of domestic lending and investment to the anticipation of contingent … domestic bank intermediation of foreign capital inflows under exchange rate pegs …

accumulation process lead to fluctuations in the real returns from intermediated investment. For this economy, we find that the … output, investment is negatively correlated with output, variations in the capital stock are quite large and interest rates …