Passage 2

A notable development in 1991 was a narrowing of current account imbalances of most major industrial countries: The U. S. current-account deficit moved to near balance. The trade component of the deficit narrowed as lower inflation and earlier dollar depreciation improved competitiveness,while the transfers component moved into substantial surplus because of war-related payments. Moreover, there was a remarkable swing in the German current account——from a surplus equivalent to 3.2% of GDP in 1990 to a deficit of 1.3%. A continuation of the surge of imports that followed unification, as well as the earlier appreciation of the deutsche mark，contributed to the swing. Several important developments in monetary conditions also took place in 1991. Reflecting more accommodative monetary policy,nominal short-term interest rates fell in the United States. In contrast, the increase in German nominal short-term interest rates to postwar highs narrowed the potential of some European Monetary System partners to reduce their rates.

Why does the appreciation of the deutsche mark cause the German current account to swift from a surplus to a deficit?