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I would like to have a primer on how the current slowdown of the German economy is affecting its partners, for instance France, Spain and Italy. More specifically, if it goes mainly through Germany's interior demand or Germany's exports that would channel through world value chains

I have tried various variants around this equation :

$$ \Delta \ln (X_t^c) = \alpha_1 + \alpha_2 \Delta \ln (X_{t-1}^c)+ \alpha_3 \Delta \ln (ID_{t}^{DE})+ \alpha_4 \Delta \ln (ID_{t-1}^{DE}) + \alpha_5 \Delta \ln (X_{t}^{DE,c}) + \epsilon_t $$ With $ID$ interior demand ; $X$ exportations.

  • Are there any manifest issue with this modeling ?
  • Any idea to improve the model ? Or any alternate way to adress this question ?
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