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B Y N IC HOL A S T H E U E R K AU F ( W ’ 11)

GERMANY & OKTOBERFEST:

DEFLATION KEPT AT BAY

T

he world’s largest fair starts at exactly noon each year in midSeptember, when Munich’s mayor

taps the festival’s first keg and declares, “O’ zapft is!” (“it’s tapped!”). The festivities will last the next 17 days and this year there is much to celebrate. Not only is it Oktoberfest’s bicentennial, but the German economy

is

thriving.

Unemployment

fell to its lowest levels since Germany’s reunification and exports are souring. The German economy grew at a spectacular annualized rate of 9% in the second quarter (more than other developed economies). Although

Oktoberfest

is

rooted

in

tradition, the festival has become big business. About six million people attend the fair each

“Drink up, Helmit! Have no fear. This mighty beer has been approved by the European Commission, regulation 4064/89, log 24, article 58...”

year. This year’s celebrations injected about one billion euros into Munich’s economy

year, while last year it sold for EUR 8.44. To

(nearly 2% of the city’s GDP) with beer

evaluate Oktoberfest’s impact on inflation

accounting for, by far, the greatest portion.

more broadly, UniCredit economists devised a

But, in today’s economic environment the

basket of goods and services called the Wiesn

primary benefit of the fest may be to mitigate

Visitor Price Index, which includes the price

deflation. Germany’s economy-wide infl ation

of public transportation and a half a grilled

rate of only one percent falls signifi cantly

chicken (Hendl) in addition to two Masses. The

short of the European Central Bank’s target

index has increased by more than 4% per year

euro-zone infl ation rate of just under 2%.

since the mid-1980s, double Germany’s annual

That’s why the nearly 2.5% price increase

inflation rate over the same period.

in one liter (or Mass) of beer since last year,

While the United States and Japan are

a strikingly greater value than the 0.3%

figuring out new methods to keep deflation at

inflation rate for bottled beer, is significant.

bay, Germany, it seems, will rely on the 200-

The average Mass sold for EUR 8.65 this

year old Oktoberfest for now. iBR

FA L L 2 0 1 0

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11/27/2010 3:13:13 PM

Profile for Daniel Hellwig

International Business Review - Fall 2015  

Fall edition of the IBR magazine at the Wharton School.

International Business Review - Fall 2015  

Fall edition of the IBR magazine at the Wharton School.

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