# German economic growth in the 20th century

Regarding this great animation:

I have the following questions:

1. Why did Germany's GDP shrink so much from 1995 to 2000, while the GDP of the US grew very healthily?

2. What was the factor of US growth in that period and why did other economies did so poorly, especially Germany's?

3. Is it because the GDP is counted in US dollars which makes other countries' GDP under-counted?

$$1.$$ My guess is that your videographic's data were simply from the World Bank's GDP (current US\$). This is nominal GDP in US\$ and does not take into account (a) changes in the exchange rate; or (b) inflation.

$$\color{red}{\text{2.}}$$ And it turns out that the chief culprit here is (a). To correct for (a), we look instead at GDP (current LCU), where Germany's LCU = Local Currency Unit is the euro.

$$\color{blue}{\text{3.}}$$ We can also further correct for (b) by looking at GDP (constant LCU).

P.S. I would not trust the website VisualCapitalist.com. Here for example, it simply took this videographic from a tweet, which in turn gives no sources.

Actually the real GDP of Germany did not shrink between 1995 - 2000. In fact between those years it was growing. Below I posted picture of Germany’s real GDP from Fred dataset (which is very good source often used in research) which shows that the real GDP did not shrink in that time window.

The reason why it looks like the GDP of Germany was shrinking is that the scale in the animation is changing at the same time as bars causing confusion. If you actually pay attention to the video you will see x axis changing and that’s why it looks like the Germany’s GDP is decreasing even though it was growing.

In general be aware of videos with fancy effects that just obscure the actual data instead of helping to understand them - plain time series graph on log scale would give much more info in this case.

• No on the graph it wasnt the scale. You can clearly see that in 1995 Germany was over 2500 billions and then 5 years later it was around 2000 billions. I wonder how 500 billions could have evaporated. – Alex T Jan 30 '19 at 11:38
• I think it has something due to the fact that the graph incorrectly uses nominal GDP in order to compare countries. Thats why Japan GDP appreciated while the ecnomy was in crisis. Weak Euro in those years contribute to smaller nominal GDP. But Real GDP was in fact growing healthy in Germany. – Alex T Jan 30 '19 at 11:40